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Cisco says computer chip shortage to last six months

231 points by mjmasn 5y ago

christkv 5y ago
I still don’t really grasp what factor causes this general shortage across all chip producers and nodes. Why is a spike in demand for pc cpus and gpus causing a shortage in other chips that might be using older nodes? Are there some underlying other constraints under chip production that is causing a ripple effect up the supply chain?
- totetsu 5y ago
  rainfall? there is a drought in Taiwan affecting ability of Fabs to operate I heard. https://techxplore.com/news/2021-04-taiwan-worst-drought-decades-deepens.html https://techxplore.com/news/2021-04-taiwan-worst-drought-dec...
- Kliment 5y ago
  Yes. The CPU and GPU demand has nothing to do with it. The reason is the car industry. For some reason in early 2020 all the car industry execs were convinced that people would buy dramatically fewer cars in 2020, due to pandemic crashing demand. Because they have a religious aversion to holding any stock they decided to shift the risk over to their suppliers, fucking said suppliers over, as the car industry normally does when they expect demand shifts. The thing that made this particular time special as opposed to business as usual is that the car execs all got it wrong, because people bought way more cars due to pandemic rather than less, due to moving out of cities and avoiding public transit. So they fucked over their suppliers a second time by demanding all those orders back. Now, suppose you're a supplier of some sort of motor driver or power conversion chip (PMIC) in early 2020. You run 200 wafers per month through a fab running some early 2000s process. Half your yearly revenue is a customized part for a particular auto vendor. That vendor calls you up and tells you that they will not be paying you for any parts this year, and you can figure out what to do with them. You can't afford to run your production at half the revenue, so you're screwed. You call up your fab and ask if you can get out of that contract and pay a penalty for doing so, and you reduce your fab order to 100 wafers per month, so you can at least serve your other customers. The fab is annoyed but they put out an announcement that a slot is free, and another vendor making a PMIC for computer motherboards buys it, because they can use the extra capacity and expect increased demand for computers. So far so normal. One vendor screwed, but they'll manage, one fab slightly annoyed that they had to reduce throughput a tiny bit while they find a new buyer. Then a few months later the car manufacturer calls you again and asks for their orders back, and more on top. You tell them to fuck off, because you can no longer manufacture it this year. They tell you they will pay literally anything because their production lines can't run without it because (for religious reasons) they have zero inventory buffers. So what do you do? You call up your fab and they say they can't help you, that slot is already gone. So you ask them to change which mask they use for the wafers you already have reserved, and instead of making your usual non-automotive products, you only make the customized chip for the automotive market. And then, because they screwed you over so badly, and you already lost lots of money and had to lay off staff due to the carmaker, you charge them 6x to 8x the price. All your other customers are now screwed, but you still come out barely ahead. Now, of course the customer not only asked for their old orders back, but more. So you call up all the other customers of the fab you use and ask them if they're willing to trade their fab slots for money. Some do, causing a shortage of whatever they make as well. Repeat this same story for literally every chipmaker that makes anything used by a car. This was the situation in January 2021. Then, several major fabs were destroyed (several in Texas, when the big freeze killed the air pumps keeping the cleanrooms sterile, and the water pipes in the walls of the buildings burst and contaminated other facilities, and one in Japan due to a fire) making the already bad problem worse. So there are several mechanisms that make part availability poor here: 1. The part you want is used in cars. Car manufacturers have locked in the following year or so of production, and "any amount extra you can make in that time" for a multiple of the normal price. Either you can't get the parts at all or you'll be paying a massive premium. 2. The part you want is not used in cars, but is made by someone who makes other parts on the same process that are used in cars. Your part has been deprioritized and will not be manufactured for months. Meanwhile stock runs out and those who hold any stock massively raise prices. 3. The part you want is not used in cars, and the manufacturer doesn't supply the car industry, but uses a process used by someone who does. Car IC suppliers have bought out their fab slots, so the part will not be manufactured for months. 4. The part you want is not used in cars, and doesn't share a process with parts that are. However, it's on the BOM of a popular product that uses such parts, and the manufacturer has seen what the market looks like and is stocking up for months ahead. Distributor inventory is therefore zero and new stock gets snapped up as soon as it shows up because a single missing part means you can't produce your product. So here we are. Shameless plug - email me if you are screwed by this and need help getting your product re-engineered to the new reality. There's a handful of manufacturers, usually obscure companies in mainland China that only really sell to the internal market, that are much less affected. Some have drop-in replacement parts for things that are out of stock, others have functionally similar parts that can be used with minor design adaptation. I've been doing that kind of redesign work for customers this whole year. Don't email me if you work in/for the car industry. You guys poisoned the well for all of us so deal with it yourselves.
  - WanderPanda 5y ago
    Awesome breakdown! Edit: Sad to see so much value destroyed
    - DrAwdeOccarim 5y ago
      I agree it's sad to see things disrupted/destroyed, but it certainly lit a fire under a ton of people who have the power to make dramatic shifts. I think this will mark the beginning of a new era in semiconductor abundance and innovation.
      - Kliment 5y ago
        My dramatic shift - never work on a project that helps the car industry. They're now on the same shitlist as weapons, coal, and surveillance capitalism.
        WanderPanda 5y ago
        Just a handful more shifts and you end up with just „never work“ :p
        syntheticnature 5y ago
        The key is to time this to align with retirement.
        rhn_mk1 5y ago
        It would be a really sad world if there was no way to survive except by doing harm. Something tells me it's an overly pessimistic outlook.
        lazide 5y ago
        It seems overly naive to assume any company's actions don't have pros and cons, or aren't part of the larger society/ecosystem you're enabling by existing? You can't take an action (or exist and take no action) without a side effect, and at the scale of any significant company, it is impossible to do what someone somewhere considers to be harm to someone or something. Picking and choosing the scope, scale, and amount of the type of harm you're comfortable with certainly seems worthwhile, but pretending there is any option that is harm free seems like self deception. Even refusing to play (not living?) has side effects most would consider harmful - at least to those around you.
- nnx 5y ago
  I think it’s a combination of 3 factors: 1) once in a century severe droughts in Taiwan force water rationing, chip production needs A LOT of water 2) stockpiling from China manufacturers (eg. Huawei) who want to mitigate real or potential US sanctions 3) generally higher demand in some sectors due to covid situation (incl. WFH and stimulus) (1) is probably the major factor, with others exacerbating it, see https://www.bbc.com/news/world-asia-56798308 https://www.bbc.com/news/world-asia-56798308
  - deleted 5y ago
    [deleted]
  - matheweis 5y ago
    I find it ironic that TSMC is building their shiny new 1100 acre fab in Arizona of all places [1], even as one of their main water sources is drying up [2]. You’d think someone in charge is thinking about these things. [1] https://www.bizjournals.com/phoenix/news/2021/03/02/taiwan-semiconductor-phoenix-plant-35-billion.html https://www.bizjournals.com/phoenix/news/2021/03/02/taiwan-s... [2] https://www.azcentral.com/story/news/local/arizona-environment/2021/04/06/colorado-river-drought-deepens-arizona-prepares-water-cutbacks/4808587001/ https://www.azcentral.com/story/news/local/arizona-environme...
    - bsder 5y ago
      Arizona has fab construction expertise, engineers and cheap workers. You have to put your new fab someplace useful or you have to import everybody. So, that cuts the number of places to a handful in the US. Texas, because TI, AMD, NXP nee Freescale nee Motorola. Idaho, because Micron. Oregon, because Intel. Arizona, because Intel and NXP. New York, because IBM. California, because everybody. If you're not doing massive R&D at the fab, you want cheap workers more than you want location to universities. That knocks out California and New York. As we just found out, Texas has weather so maybe not a great place for a 24/7 fab. Can you imagine TSMC personnel dealing with winter? So, probably not Idaho. So, Oregon or Arizona. I suspect Oregon is more expensive than Arizona in the places you want to put a fab.
throwaway4good 5y ago
2020 has seen record investment in semiconductor manufacturing equipment (+20% to 70 B USD). https://www.scmp.com/tech/tech-trends/article/3129611/us-china-tech-war-china-becomes-worlds-top-semiconductor-equipment https://www.scmp.com/tech/tech-trends/article/3129611/us-chi... In particular in China and South Korea. I wonder when all this extra capacity translates into more supply?
- scotty79 5y ago
  2 years should be enough from what I've read.
  - Bombthecat 5y ago
    Yeah, most of the time i read it is something between 2 or 3 years before a new fab opens.
    - throwaway4good 5y ago
      To me it looks that following this chip shortage there will come a massive supply glut as all this manufacturing capacity comes online. Maybe China and South Korea will be alright, as they can focus on the Chinese market in a world bifurcated by the US-China Tech war, but for the rest of the world, it seems that a supply glut is sure to follow?
      - 11thEarlOfMar 5y ago
        Yes. This pattern has been repeating since the advent of mass-producing semiconductors. Most recently, 2016-2017, a new NAND technology emerged. Referred to as 3D NAND, it greatly increased bit-density and reduced cost of NAND flash. Samsung, Toshiba and to some extent Micron all decided they were going to lead that massive market. Moreover, the 3D NAND required many more layers and therefore more 'equipment per chip'. These three bought new equipment it required in record amounts. You'll see companies like Lam Research with revenue spikes in 2017. 2019, though, not so much. All the capacity came online at the same time, there was oversupply, the price of 3D NAND plummeted, and the chip companies pulled back buying dramatically, sending the equipment suppliers from feast to famine, again. I recall a 2-year period in the late '90s where the San Jose Mercury News headline in August read '1,000 Jobs Open at Lam and Applied' to one year later, 'Lam to Lay Off 1,500'.
kingosticks 5y ago
Cisco are also getting stung at the latest node. For their new line of Silicon One switch/router chips they decided to ditch their usual fabless partner (Broadcom?) and go direct to the fab (I think it's Samsung but not sure - doesn't really matter anyway). They did this to save money and also with the intention of producing their own merchant silicon to directly compete with Broadcom's. This would have been a great plan if there hadn't been a major 7nm capacity problem which resulted in the smaller players, such as themselves, not getting the wafers they need. I don't think there are any public reports of anyone using Silicon One yet (except Cisco themselves) but this won't help them win any orders. The car industry might have something to do with it also but it's by no means the only cause of Cisco's concerns.
- wayoutthere 5y ago
  I’ve gotten burned by Cisco in a very similar situation. At this point they basically lean on their largest telecom customers to build their solutions for themz They moved to this model because the Comcasts / AT&Ts / Verizons around the world started looking at contracting with factories to build their own white-label network gear (when you spend $10 billion+ a year on network gear, this starts making sense). Cisco’s pitch is basically “give us all your requirements and we’ll build whatever you want as long as we have the option to sell it in the market”. Never mind that Cisco is an absolutely terrible partner and the telecoms realized they were getting almost nothing out of the deal, so after a few years the big telecoms all dumped them and went with white label factories in China while working with American companies like Intel and Qualcomm on large component orders to supply the factories. Which left all the small and mid-size telecoms in the lurch for a generational upgrade they were expecting (which is a lot of why Huawei has so much market share in 5G).
genericlogic 5y ago
L
GNU_James 5y ago
Just 2 more weeks!
xyzzy21 5y ago
The biggest problem is everything is JIT so all supply chains using JIT (like all of them) get disrupted with as little as 10% variance from the media flow rates. The only real answer is to relax the reasons why we have JIT: taxes on inventory which prevent accumulating safety stock inventory. Having larger safety stock would very quickly end this supply chain disruption and solve the chip shortage in few months rather than 6-24 months.
- eloff 5y ago
  There are taxes on inventory? How does that work? I thought it was just expensive to tie up a lot of capital on inventory.
  - warlog 5y ago
    Me too(?)
  - patmorgan23 5y ago
    Both are issues. In most states the property tax applies to all physical assets of the business. So they have to pay taxes on all their furniture, manufacturing equipment, computers, and yes any inventory they have sitting around.
    - throwaway2048 5y ago
      Property taxes are a rounding error compared to the value of even a small warehouse full of modestly priced consumer goods, talking far less than 1%, especially in industrial areas. It might be a factor in very low priced bulk goods like gravel or something, but I would be shocked even then.
    - jamiek88 5y ago
      Never heard of this is any US state or country I’ve worked in and that’s many. Can you supply an example ?
      - 5y ago
kevmo 5y ago
This seems overly optimistic.
InitEnabler 5y ago
The winter storm in Texas did a big damper on NXP, Samsung, etc. Some fabs are not at 100% so I highly doubt it's going to take 6 months to recover.
- HowardStark 5y ago
  Interesting. Other estimates had put it in the “upwards of a year” territory [1,2] so to me this 6-month estimate seems optimistic. Samsung only recently (end of March) got their fab up and running close to production levels. NXP was a bit faster on the draw, but even still there are likely to still be more issues than normal. At the end of the day, not much to do except hope for the best and expect the worst. [1] https://arstechnica.com/tech-policy/2021/04/global-chip-shortage-may-drag-into-2022/ https://arstechnica.com/tech-policy/2021/04/global-chip-shor... [2] https://www.washingtonpost.com/technology/2021/04/13/intel-ceo-semiconductor-chip-shortage/ https://www.washingtonpost.com/technology/2021/04/13/intel-c...
thedeepdive 5y ago
Having worked in the auto industry I can say this is the sort of thing was never, ever expected from a supply shortage. The frailty of the global supply chain network has been brutally exposed these last 14 months.
- hctaw 5y ago
  I thought it was a poorly forecasted demand shortage that led to a supply shortage, since auto manufacturers reneged on their purchasing a year ago.
- tonyedgecombe 5y ago
  > The frailty of the global supply chain network has been brutally exposed these last 14 months. I think it’s the exact opposite, supply chains have held up remarkably well. If I had believed some people here we would have been eating each other by now but apart from a shortfall in toilet paper things have been fine.
  - f6v 5y ago
    There were some shortages in Belgium that I didn’t expect. Like frozen broccoli missing everywhere for a week or two. Flour went missing for a month, probably due to panic buying. But otherwise, I enjoy fresh fruits, vegetables, and nuts which are definitely imported from somewhere.
    - dhosek 5y ago
      There are odd disappearances from the grocery shelves from time to time. For example, one thing I’ve noticed is that outside of the trinity of Cola/Diet-Cola/Lemon-Lime soda, the availability of other sodas has been hit or miss for the last year. There have been others, less memorable because they’re more transient, but it’s more often the case that I’m likely to not be able to find product X at the grocery store in the last year than previously.
      - cableshaft 5y ago
tims33 5y ago
“The problems have been worsened by a string of other factors, including a fire at a semiconductor factory and weather issues.” It is sometimes humbling to remember that despite our technical advances we’re still subject to the forces of nature.
- segmondy 5y ago
  Fire at a factory is not a force of nature, and it might be that the weather issue is also not a force of nature like we saw in TX. Sometimes saving money instead of investing in risk mitigation systems cause things to fail. I don't believe force of nature is behind the chip shortage unless we are counting on "to err is human" then sure.
  - afrodc_ 5y ago
    I'm fairly certain the weather issue is a very gnarly drought in Taiwan which would fit the bill https://www.google.com/amp/s/www.bbc.com/news/world-asia-56798308.amp https://www.google.com/amp/s/www.bbc.com/news/world-asia-567...
  - afrodc_ 5y ago
    I'm fairly certain it's a gnarly drought in Taiwan that the article is talking about which would fit the bill https://www.google.com/amp/s/www.bbc.com/news/world-asia-56798308.amp https://www.google.com/amp/s/www.bbc.com/news/world-asia-567...
- hristov 5y ago
  Well lets be honest, while we are subject to the forces of nature, this particular time we mostly became a victim of the forces of the Texas devil may care mentality.
MangoCoffee 5y ago
"There are numerous other applications for semiconductors, but these represent the general trend. One cannot blame semiconductor companies for switching capacity to growing applications while automakers cut production (and presumably semiconductor orders) by 40% over two quarters. It will take time to resolve the shortages. TSMC stated it takes at least six months from semiconductor production to auto production and involves several links in the supply chain. Capacity can be shifted in the short term, but increasing overall capacity often requires construction of new wafer fabs, which takes about two years. Automakers gave up their place in line, so they will have to wait their turn for semiconductors." https://semiwiki.com/semiconductor-services/298336-automakers-to-blame-for-semiconductor-shortage/ https://semiwiki.com/semiconductor-services/298336-automaker...
- downrightmike 5y ago
  Pretty much the only auto supplier that wasn't forced to move to just outside the automaker's own factories and on the tight chain of just in time. It was just acceptable to not highly integrate them, and oops. Maybe the automakers will make their own fabs. Which is what is really needed. But then again, we've been in a gut because of over production for years. So really, this is just automakers shifting the blame for the lack of demand of the last decade to someone that their stockholders are ok with blaming, because why admit your mistakes and fix them, when you can blame someone else?
  - dehrmann 5y ago
    > Maybe the automakers will make their own fabs. Which is what is really needed. Seems like a massive investment in something that isn't their core competency (at all) for a 6-month disruption that hits ~once a generation+. It'd be a lot cheaper to just pay a foundry for reserved capacity, to stockpile a year supply of chips, or engineer cars to have more options for chips.
    - AJ007 5y ago
      If Intel couldn’t keep up with the latest fabs I can’t believe an automaker could start from 0 and have any remote chance of success. Volume would be too low to make it work financially even if they could.
dehrmann 5y ago
Dumb question: automakers do relatively simple things with their chips. Is there room on wafers with more advanced chips to squeeze in automotive chips?
- alted 5y ago
  Nope. Since most manufacturing steps are performed on an entire silicon wafer at once, the cost per chip is cheaper if there are more chips on each wafer. As a result, wafers (for both basic and advanced chips) are filled with rectangular chips packed as tightly as possible (and when designing chips, prices are often talked about in units of "price per area of silicon"). Images from a web search for "semiconductor wafer dicing" illustrate this [1]. [1] https://duckduckgo.com/?t=ffab&q=semiconductor+wafer+dicing&iax=images&ia=images https://duckduckgo.com/?t=ffab&q=semiconductor+wafer+dicing&...
- vdfs 5y ago
  I don't think it's simple things, vehicle has around 60 to 100 sensors on board, some might have even more, they also have infotainment which is tablet-like level of hardware, imaging all different things they have to handle, and how reliable it have to be.
  - dehrmann 5y ago
    By simple, I meant gate count. I figured they'd be closer to a microcontroller or Pentium than a Ryzen.
gtirloni 5y ago
We often talk about the auto industry as a whole screwing up but I wonder if there's an automaker out there that didn't follow this trend and is doing fine.
- sethhochberg 5y ago
  As usual when talking about supply chains and industrial processes, it seems like Toyota managed to do the right stuff to avoid delivery problems - https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage https://www.bloomberg.com/news/articles/2021-04-07/how-toyot... They seemingly learned from a few other supplier disasters over the last decade, and were better-prepared to deal with shortages of critical parts from their vendors.
- gingericha 5y ago
  Toyota? https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage https://www.bloomberg.com/news/articles/2021-04-07/how-toyot...
aurizon 5y ago
One of the large problems is a shortage of some common part that is widely used. I recall when 74LS245 were selling for over $100 each to people with $500,000 machines that needed that part. During that shortage we actually built small boards with 3-4 lesser chips that fulfilled the need for the part. When a genuine 245 was obtained, it could be easily swapped in, but many machines lived out their full life with this kluge in it. That one series of chips built Future into the colossuss it is today because they had the smarts to get their engineers to spec in that family (and many others) and Future booked huge orders with Japanese suppliers and enjoyed huge margins. ClassIC did the same thing later. Now Asia dominates.
totalZero 5y ago
I'm more inclined to believe TSMC and Intel than Cisco. They're closer to the problem. "actually we see that demand continued to be high and the shortage will continue throughout this year and may be extended into 2022 also." C. C. Wei, TSMC CEO "We expect it will take a couple of years for the ecosystem to make the significant investments to address these shortages." Pat Gelsinger, Intel CEO Also, this is a deeply technical topic where BBC should cite engineers and industry veterans, not Dan Ives from Wedbush Securities.

231 points by mjmasn 5y ago

I still don’t really grasp what factor causes this general shortage across all chip producers and nodes. Why is a spike in demand for pc cpus and gpus causing a shortage in other chips that might be using older nodes? Are there some underlying other constraints under chip production that is causing a ripple effect up the supply chain?

totetsu 5y ago
rainfall? there is a drought in Taiwan affecting ability of Fabs to operate I heard. https://techxplore.com/news/2021-04-taiwan-worst-drought-decades-deepens.html https://techxplore.com/news/2021-04-taiwan-worst-drought-dec...
Kliment 5y ago
Yes. The CPU and GPU demand has nothing to do with it. The reason is the car industry. For some reason in early 2020 all the car industry execs were convinced that people would buy dramatically fewer cars in 2020, due to pandemic crashing demand. Because they have a religious aversion to holding any stock they decided to shift the risk over to their suppliers, fucking said suppliers over, as the car industry normally does when they expect demand shifts. The thing that made this particular time special as opposed to business as usual is that the car execs all got it wrong, because people bought way more cars due to pandemic rather than less, due to moving out of cities and avoiding public transit. So they fucked over their suppliers a second time by demanding all those orders back. Now, suppose you're a supplier of some sort of motor driver or power conversion chip (PMIC) in early 2020. You run 200 wafers per month through a fab running some early 2000s process. Half your yearly revenue is a customized part for a particular auto vendor. That vendor calls you up and tells you that they will not be paying you for any parts this year, and you can figure out what to do with them. You can't afford to run your production at half the revenue, so you're screwed. You call up your fab and ask if you can get out of that contract and pay a penalty for doing so, and you reduce your fab order to 100 wafers per month, so you can at least serve your other customers. The fab is annoyed but they put out an announcement that a slot is free, and another vendor making a PMIC for computer motherboards buys it, because they can use the extra capacity and expect increased demand for computers. So far so normal. One vendor screwed, but they'll manage, one fab slightly annoyed that they had to reduce throughput a tiny bit while they find a new buyer. Then a few months later the car manufacturer calls you again and asks for their orders back, and more on top. You tell them to fuck off, because you can no longer manufacture it this year. They tell you they will pay literally anything because their production lines can't run without it because (for religious reasons) they have zero inventory buffers. So what do you do? You call up your fab and they say they can't help you, that slot is already gone. So you ask them to change which mask they use for the wafers you already have reserved, and instead of making your usual non-automotive products, you only make the customized chip for the automotive market. And then, because they screwed you over so badly, and you already lost lots of money and had to lay off staff due to the carmaker, you charge them 6x to 8x the price. All your other customers are now screwed, but you still come out barely ahead. Now, of course the customer not only asked for their old orders back, but more. So you call up all the other customers of the fab you use and ask them if they're willing to trade their fab slots for money. Some do, causing a shortage of whatever they make as well. Repeat this same story for literally every chipmaker that makes anything used by a car. This was the situation in January 2021. Then, several major fabs were destroyed (several in Texas, when the big freeze killed the air pumps keeping the cleanrooms sterile, and the water pipes in the walls of the buildings burst and contaminated other facilities, and one in Japan due to a fire) making the already bad problem worse. So there are several mechanisms that make part availability poor here: 1. The part you want is used in cars. Car manufacturers have locked in the following year or so of production, and "any amount extra you can make in that time" for a multiple of the normal price. Either you can't get the parts at all or you'll be paying a massive premium. 2. The part you want is not used in cars, but is made by someone who makes other parts on the same process that are used in cars. Your part has been deprioritized and will not be manufactured for months. Meanwhile stock runs out and those who hold any stock massively raise prices. 3. The part you want is not used in cars, and the manufacturer doesn't supply the car industry, but uses a process used by someone who does. Car IC suppliers have bought out their fab slots, so the part will not be manufactured for months. 4. The part you want is not used in cars, and doesn't share a process with parts that are. However, it's on the BOM of a popular product that uses such parts, and the manufacturer has seen what the market looks like and is stocking up for months ahead. Distributor inventory is therefore zero and new stock gets snapped up as soon as it shows up because a single missing part means you can't produce your product. So here we are. Shameless plug - email me if you are screwed by this and need help getting your product re-engineered to the new reality. There's a handful of manufacturers, usually obscure companies in mainland China that only really sell to the internal market, that are much less affected. Some have drop-in replacement parts for things that are out of stock, others have functionally similar parts that can be used with minor design adaptation. I've been doing that kind of redesign work for customers this whole year. Don't email me if you work in/for the car industry. You guys poisoned the well for all of us so deal with it yourselves.
- WanderPanda 5y ago
  Awesome breakdown! Edit: Sad to see so much value destroyed
  - DrAwdeOccarim 5y ago
    I agree it's sad to see things disrupted/destroyed, but it certainly lit a fire under a ton of people who have the power to make dramatic shifts. I think this will mark the beginning of a new era in semiconductor abundance and innovation.
    - Kliment 5y ago
      My dramatic shift - never work on a project that helps the car industry. They're now on the same shitlist as weapons, coal, and surveillance capitalism.
      - WanderPanda 5y ago
        Just a handful more shifts and you end up with just „never work“ :p
        syntheticnature 5y ago
        The key is to time this to align with retirement.
        rhn_mk1 5y ago
        It would be a really sad world if there was no way to survive except by doing harm. Something tells me it's an overly pessimistic outlook.
        lazide 5y ago
        It seems overly naive to assume any company's actions don't have pros and cons, or aren't part of the larger society/ecosystem you're enabling by existing? You can't take an action (or exist and take no action) without a side effect, and at the scale of any significant company, it is impossible to do what someone somewhere considers to be harm to someone or something. Picking and choosing the scope, scale, and amount of the type of harm you're comfortable with certainly seems worthwhile, but pretending there is any option that is harm free seems like self deception. Even refusing to play (not living?) has side effects most would consider harmful - at least to those around you.
nnx 5y ago
I think it’s a combination of 3 factors: 1) once in a century severe droughts in Taiwan force water rationing, chip production needs A LOT of water 2) stockpiling from China manufacturers (eg. Huawei) who want to mitigate real or potential US sanctions 3) generally higher demand in some sectors due to covid situation (incl. WFH and stimulus) (1) is probably the major factor, with others exacerbating it, see https://www.bbc.com/news/world-asia-56798308 https://www.bbc.com/news/world-asia-56798308
- deleted 5y ago
  [deleted]
- matheweis 5y ago
  I find it ironic that TSMC is building their shiny new 1100 acre fab in Arizona of all places [1], even as one of their main water sources is drying up [2]. You’d think someone in charge is thinking about these things. [1] https://www.bizjournals.com/phoenix/news/2021/03/02/taiwan-semiconductor-phoenix-plant-35-billion.html https://www.bizjournals.com/phoenix/news/2021/03/02/taiwan-s... [2] https://www.azcentral.com/story/news/local/arizona-environment/2021/04/06/colorado-river-drought-deepens-arizona-prepares-water-cutbacks/4808587001/ https://www.azcentral.com/story/news/local/arizona-environme...
  - bsder 5y ago
    Arizona has fab construction expertise, engineers and cheap workers. You have to put your new fab someplace useful or you have to import everybody. So, that cuts the number of places to a handful in the US. Texas, because TI, AMD, NXP nee Freescale nee Motorola. Idaho, because Micron. Oregon, because Intel. Arizona, because Intel and NXP. New York, because IBM. California, because everybody. If you're not doing massive R&D at the fab, you want cheap workers more than you want location to universities. That knocks out California and New York. As we just found out, Texas has weather so maybe not a great place for a 24/7 fab. Can you imagine TSMC personnel dealing with winter? So, probably not Idaho. So, Oregon or Arizona. I suspect Oregon is more expensive than Arizona in the places you want to put a fab.

throwaway4good 5y ago

2020 has seen record investment in semiconductor manufacturing equipment (+20% to 70 B USD). https://www.scmp.com/tech/tech-trends/article/3129611/us-china-tech-war-china-becomes-worlds-top-semiconductor-equipment https://www.scmp.com/tech/tech-trends/article/3129611/us-chi... In particular in China and South Korea. I wonder when all this extra capacity translates into more supply?

scotty79 5y ago
2 years should be enough from what I've read.
- Bombthecat 5y ago
  Yeah, most of the time i read it is something between 2 or 3 years before a new fab opens.
  - throwaway4good 5y ago
    To me it looks that following this chip shortage there will come a massive supply glut as all this manufacturing capacity comes online. Maybe China and South Korea will be alright, as they can focus on the Chinese market in a world bifurcated by the US-China Tech war, but for the rest of the world, it seems that a supply glut is sure to follow?
    - 11thEarlOfMar 5y ago
      Yes. This pattern has been repeating since the advent of mass-producing semiconductors. Most recently, 2016-2017, a new NAND technology emerged. Referred to as 3D NAND, it greatly increased bit-density and reduced cost of NAND flash. Samsung, Toshiba and to some extent Micron all decided they were going to lead that massive market. Moreover, the 3D NAND required many more layers and therefore more 'equipment per chip'. These three bought new equipment it required in record amounts. You'll see companies like Lam Research with revenue spikes in 2017. 2019, though, not so much. All the capacity came online at the same time, there was oversupply, the price of 3D NAND plummeted, and the chip companies pulled back buying dramatically, sending the equipment suppliers from feast to famine, again. I recall a 2-year period in the late '90s where the San Jose Mercury News headline in August read '1,000 Jobs Open at Lam and Applied' to one year later, 'Lam to Lay Off 1,500'.

kingosticks 5y ago

Cisco are also getting stung at the latest node. For their new line of Silicon One switch/router chips they decided to ditch their usual fabless partner (Broadcom?) and go direct to the fab (I think it's Samsung but not sure - doesn't really matter anyway). They did this to save money and also with the intention of producing their own merchant silicon to directly compete with Broadcom's. This would have been a great plan if there hadn't been a major 7nm capacity problem which resulted in the smaller players, such as themselves, not getting the wafers they need. I don't think there are any public reports of anyone using Silicon One yet (except Cisco themselves) but this won't help them win any orders. The car industry might have something to do with it also but it's by no means the only cause of Cisco's concerns.

wayoutthere 5y ago
I’ve gotten burned by Cisco in a very similar situation. At this point they basically lean on their largest telecom customers to build their solutions for themz They moved to this model because the Comcasts / AT&Ts / Verizons around the world started looking at contracting with factories to build their own white-label network gear (when you spend $10 billion+ a year on network gear, this starts making sense). Cisco’s pitch is basically “give us all your requirements and we’ll build whatever you want as long as we have the option to sell it in the market”. Never mind that Cisco is an absolutely terrible partner and the telecoms realized they were getting almost nothing out of the deal, so after a few years the big telecoms all dumped them and went with white label factories in China while working with American companies like Intel and Qualcomm on large component orders to supply the factories. Which left all the small and mid-size telecoms in the lurch for a generational upgrade they were expecting (which is a lot of why Huawei has so much market share in 5G).

genericlogic 5y ago

GNU_James 5y ago

Just 2 more weeks!

xyzzy21 5y ago

The biggest problem is everything is JIT so all supply chains using JIT (like all of them) get disrupted with as little as 10% variance from the media flow rates. The only real answer is to relax the reasons why we have JIT: taxes on inventory which prevent accumulating safety stock inventory. Having larger safety stock would very quickly end this supply chain disruption and solve the chip shortage in few months rather than 6-24 months.

eloff 5y ago
There are taxes on inventory? How does that work? I thought it was just expensive to tie up a lot of capital on inventory.
- warlog 5y ago
  Me too(?)
- patmorgan23 5y ago
  Both are issues. In most states the property tax applies to all physical assets of the business. So they have to pay taxes on all their furniture, manufacturing equipment, computers, and yes any inventory they have sitting around.
  - throwaway2048 5y ago
    Property taxes are a rounding error compared to the value of even a small warehouse full of modestly priced consumer goods, talking far less than 1%, especially in industrial areas. It might be a factor in very low priced bulk goods like gravel or something, but I would be shocked even then.
  - jamiek88 5y ago
    Never heard of this is any US state or country I’ve worked in and that’s many. Can you supply an example ?
    - 5y ago

kevmo 5y ago

This seems overly optimistic.

InitEnabler 5y ago

The winter storm in Texas did a big damper on NXP, Samsung, etc. Some fabs are not at 100% so I highly doubt it's going to take 6 months to recover.

HowardStark 5y ago
Interesting. Other estimates had put it in the “upwards of a year” territory [1,2] so to me this 6-month estimate seems optimistic. Samsung only recently (end of March) got their fab up and running close to production levels. NXP was a bit faster on the draw, but even still there are likely to still be more issues than normal. At the end of the day, not much to do except hope for the best and expect the worst. [1] https://arstechnica.com/tech-policy/2021/04/global-chip-shortage-may-drag-into-2022/ https://arstechnica.com/tech-policy/2021/04/global-chip-shor... [2] https://www.washingtonpost.com/technology/2021/04/13/intel-ceo-semiconductor-chip-shortage/ https://www.washingtonpost.com/technology/2021/04/13/intel-c...

thedeepdive 5y ago

Having worked in the auto industry I can say this is the sort of thing was never, ever expected from a supply shortage. The frailty of the global supply chain network has been brutally exposed these last 14 months.

hctaw 5y ago
I thought it was a poorly forecasted demand shortage that led to a supply shortage, since auto manufacturers reneged on their purchasing a year ago.
tonyedgecombe 5y ago
> The frailty of the global supply chain network has been brutally exposed these last 14 months. I think it’s the exact opposite, supply chains have held up remarkably well. If I had believed some people here we would have been eating each other by now but apart from a shortfall in toilet paper things have been fine.
- f6v 5y ago
  There were some shortages in Belgium that I didn’t expect. Like frozen broccoli missing everywhere for a week or two. Flour went missing for a month, probably due to panic buying. But otherwise, I enjoy fresh fruits, vegetables, and nuts which are definitely imported from somewhere.
  - dhosek 5y ago
    There are odd disappearances from the grocery shelves from time to time. For example, one thing I’ve noticed is that outside of the trinity of Cola/Diet-Cola/Lemon-Lime soda, the availability of other sodas has been hit or miss for the last year. There have been others, less memorable because they’re more transient, but it’s more often the case that I’m likely to not be able to find product X at the grocery store in the last year than previously.
    - cableshaft 5y ago

tims33 5y ago

“The problems have been worsened by a string of other factors, including a fire at a semiconductor factory and weather issues.” It is sometimes humbling to remember that despite our technical advances we’re still subject to the forces of nature.

segmondy 5y ago
Fire at a factory is not a force of nature, and it might be that the weather issue is also not a force of nature like we saw in TX. Sometimes saving money instead of investing in risk mitigation systems cause things to fail. I don't believe force of nature is behind the chip shortage unless we are counting on "to err is human" then sure.
- afrodc_ 5y ago
  I'm fairly certain the weather issue is a very gnarly drought in Taiwan which would fit the bill https://www.google.com/amp/s/www.bbc.com/news/world-asia-56798308.amp https://www.google.com/amp/s/www.bbc.com/news/world-asia-567...
- afrodc_ 5y ago
  I'm fairly certain it's a gnarly drought in Taiwan that the article is talking about which would fit the bill https://www.google.com/amp/s/www.bbc.com/news/world-asia-56798308.amp https://www.google.com/amp/s/www.bbc.com/news/world-asia-567...
hristov 5y ago
Well lets be honest, while we are subject to the forces of nature, this particular time we mostly became a victim of the forces of the Texas devil may care mentality.

MangoCoffee 5y ago

"There are numerous other applications for semiconductors, but these represent the general trend. One cannot blame semiconductor companies for switching capacity to growing applications while automakers cut production (and presumably semiconductor orders) by 40% over two quarters. It will take time to resolve the shortages. TSMC stated it takes at least six months from semiconductor production to auto production and involves several links in the supply chain. Capacity can be shifted in the short term, but increasing overall capacity often requires construction of new wafer fabs, which takes about two years. Automakers gave up their place in line, so they will have to wait their turn for semiconductors." https://semiwiki.com/semiconductor-services/298336-automakers-to-blame-for-semiconductor-shortage/ https://semiwiki.com/semiconductor-services/298336-automaker...

downrightmike 5y ago
Pretty much the only auto supplier that wasn't forced to move to just outside the automaker's own factories and on the tight chain of just in time. It was just acceptable to not highly integrate them, and oops. Maybe the automakers will make their own fabs. Which is what is really needed. But then again, we've been in a gut because of over production for years. So really, this is just automakers shifting the blame for the lack of demand of the last decade to someone that their stockholders are ok with blaming, because why admit your mistakes and fix them, when you can blame someone else?
- dehrmann 5y ago
  > Maybe the automakers will make their own fabs. Which is what is really needed. Seems like a massive investment in something that isn't their core competency (at all) for a 6-month disruption that hits ~once a generation+. It'd be a lot cheaper to just pay a foundry for reserved capacity, to stockpile a year supply of chips, or engineer cars to have more options for chips.
  - AJ007 5y ago
    If Intel couldn’t keep up with the latest fabs I can’t believe an automaker could start from 0 and have any remote chance of success. Volume would be too low to make it work financially even if they could.

dehrmann 5y ago

Dumb question: automakers do relatively simple things with their chips. Is there room on wafers with more advanced chips to squeeze in automotive chips?

alted 5y ago
Nope. Since most manufacturing steps are performed on an entire silicon wafer at once, the cost per chip is cheaper if there are more chips on each wafer. As a result, wafers (for both basic and advanced chips) are filled with rectangular chips packed as tightly as possible (and when designing chips, prices are often talked about in units of "price per area of silicon"). Images from a web search for "semiconductor wafer dicing" illustrate this [1]. [1] https://duckduckgo.com/?t=ffab&q=semiconductor+wafer+dicing&iax=images&ia=images https://duckduckgo.com/?t=ffab&q=semiconductor+wafer+dicing&...
vdfs 5y ago
I don't think it's simple things, vehicle has around 60 to 100 sensors on board, some might have even more, they also have infotainment which is tablet-like level of hardware, imaging all different things they have to handle, and how reliable it have to be.
- dehrmann 5y ago
  By simple, I meant gate count. I figured they'd be closer to a microcontroller or Pentium than a Ryzen.

gtirloni 5y ago

We often talk about the auto industry as a whole screwing up but I wonder if there's an automaker out there that didn't follow this trend and is doing fine.

sethhochberg 5y ago
As usual when talking about supply chains and industrial processes, it seems like Toyota managed to do the right stuff to avoid delivery problems - https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage https://www.bloomberg.com/news/articles/2021-04-07/how-toyot... They seemingly learned from a few other supplier disasters over the last decade, and were better-prepared to deal with shortages of critical parts from their vendors.
gingericha 5y ago
Toyota? https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage https://www.bloomberg.com/news/articles/2021-04-07/how-toyot...

aurizon 5y ago

One of the large problems is a shortage of some common part that is widely used. I recall when 74LS245 were selling for over $100 each to people with $500,000 machines that needed that part. During that shortage we actually built small boards with 3-4 lesser chips that fulfilled the need for the part. When a genuine 245 was obtained, it could be easily swapped in, but many machines lived out their full life with this kluge in it. That one series of chips built Future into the colossuss it is today because they had the smarts to get their engineers to spec in that family (and many others) and Future booked huge orders with Japanese suppliers and enjoyed huge margins. ClassIC did the same thing later. Now Asia dominates.

totalZero 5y ago

I'm more inclined to believe TSMC and Intel than Cisco. They're closer to the problem. "actually we see that demand continued to be high and the shortage will continue throughout this year and may be extended into 2022 also." C. C. Wei, TSMC CEO "We expect it will take a couple of years for the ecosystem to make the significant investments to address these shortages." Pat Gelsinger, Intel CEO Also, this is a deeply technical topic where BBC should cite engineers and industry veterans, not Dan Ives from Wedbush Securities.