9 ms·

Several factors: 1. There was real and relatively sudden increase in demand: a. COVID-driven in part, all students and many additional employees had to buy co

• rubidium 5y ago
  Can confirm. Anyone working in supply chain is now told to buy 1-4 year supply of as many of the critical chips needed as they can. It used to be all about how JIT could it be. When the whole chip supply chain shifts from JIT to “get all you can while you can” it causes the shortages. 2nd hand market is seeing astounding mark-ups.
  • jnwatson 5y ago
    If everyone buys 4 years of supplies, that exacerbates the problem. The supply chain bullwhip effect will be massive. For the next 3 years, fabs will be swimming in profit. After that, I expect a major correction.
    • xxpor 5y ago
      Will the fabs have the discipline to actually use the extra cash injection wisely?
      • monocasa 5y ago
        They're the best positioned to do that, they're one of the last classic long tail, high capital investment portions of the industry. Each node is only competitive for a short while, but they have multiple nodes in the development pipeline because of how long it takes, and a misstep on a single node can devastate the whole company if you're not in the #1 spot originally. So the answer is we don't know it, depends on the management currently at the fab, but they have the right external incentive structure to handle it well.
    • nickff 5y ago
      Everyone is suggested to place scheduled orders for the future. Nobody (that I’ve heard) is suggesting that you immediately purchase and carry four years of inventory. People in this market are generally very intelligent, and there have been a number of booms and busts in semiconductors in the last 30 years.
  • mohanmcgeek 5y ago
    Does that mean most companies will be using 2020 generation chips until 2024? Sounds they'll dump it in trash eventually and it'll be a terrible waste of resources
    • rubidium 5y ago
      Companies in my industry have products they sell for 10-20 years. The chips will get used. Product updates often keep the same chip, and the same chip is used across multiple product lines. EOL for these chips usually means a bunch of firmware engineers in sustaining need to scratch their head and read 10-15 year old documentation to find a viable replacement.
    • deleted 5y ago
      [deleted]
    • HWR_14 5y ago
      For the vast majority of things I buy that use chips (obviously not consoles, phones and computers) they could easily be using chips from 2010 and the only difference might be a slightly higher electricity draw.
    • monocasa 5y ago
      Where I worked that I participated in the board design process, we'd get "lifetime buys" of chips on a many year cycle anyway for design stability reasons. Who cares if the microcontroller is using a couple more watts than it could be from aggressively respinning if it's sitting next to a 500w motor?
    • 41b696ef1113 5y ago
      Chips are performing an astounding number of tasks these days. Microwaves, vacuum cleaners, toasters, etc. None of these applications require advanced chips and could settle for something from 20 years ago.
    • mrtweetyhack 5y ago
• tzs 5y ago
  > Note that no, the state of the art fabs cannot be re-outfitted to make legacy chips. The old equipment they were developed on is generally no longer available and the profit from making those inexpensive chips would not justify the capital spend on new equipment. Interesting. I had assumed that the difference between state of the art fabs and older fabs was that state of the art fabs can make smaller things, and perhaps more geometrically complicated things, but that they don't have to. If they wanted to make a design that only uses bigger things and simpler geometry they could. Where does this assumption break down?
  • 11thEarlOfMar 5y ago
    State of the art machines are used to make state of the art high-value chips. FPGAs, GPUs, CPUs, RAM, SRAM As those chips run through their life-cycle, their value drops. After 15 years, the price the chips can sell for will drop 90% or more. If there is a spike in demand at that point, there is no ROI on purchasing brand new equipment. The demand spike is seen as temporary. Hence, the chip makers are telling the buyers to design out the old chips and upgrade to new. Many companies can do this. But some are constrained by industry regulation (aerospace) or industry practice (semiconductors). I've mentioned before the irony that companies that make semiconductor equipment are struggling to ship more tools because they can't get enough (of certain chips) to complete building them.
    • nl 5y ago
      While this is mostly correct, it is worth noting that FPGAs are mostly 28nm and 20nm processes, and have just started shipping on 16nm[1]. That doesn't require state of the art. The FPGA market is comparatively small though so doesn't affect the market dynamics much. [1] https://www.xilinx.com/about/generation-ahead-16nm.html https://www.xilinx.com/about/generation-ahead-16nm.html
  • belltaco 5y ago
    >Interesting. I had assumed that the difference between state of the art fabs and older fabs was that state of the art fabs can make smaller things, and perhaps more geometrically complicated things, but that they don't have to. If they wanted to make a design that only uses bigger things and simpler geometry they could. >Where does this assumption break down? Why would they want to? There is heavy and overbooked demand for the 'smaller and complicated things' that make more money, and add the extra cost of the design to make the 'bigger and smaller' things, and it's a no brainer.
• Tarragon 5y ago
  Regarding #3: We had an FPGA that is normally in stock or at most a few weeks lead time push out to a 56 weeks lead time. (Side note: This is for machine used to in chip manufacturing... uhm, oops.) What happened then is that the vendor prioritized larger more expensive parts. They use more silicon per part but the over all profit per wafer is higher. It's not a terrible decision, it's possible to move designs to an over provisioned FPGA but usually not the other way. The lead time for higher end parts started coming down, not to normal, but less than a year. Meanwhile lead-times for the low end parts kept getting longer.
  • r-bryan 5y ago
    This scenario is very reminiscent of the leadup to the Innovator's Dilemma. The dinosaurs grow taller and fatter seeking and thriving on the juicy foliage higher up the tree, while the scrappy little mammals claw away at its soft underbelly. Nobody's going to fabricate semiconductors in their garage. But couldn't someone make a modest profit without first investing $2.0e10, like Intel? Or is it just that the profitability scale is such that if you had an extra $2.0e7 to invest, you're better off buying Intel stock?
    • riskneutral 5y ago
      I don't think that you can build a new semiconductor factory for $20 million (2e7), especially not when there is a chip shortage happening and you need factory equipment containing such chips.
      • 11thEarlOfMar 5y ago
        State of the art fabs retail for US$10 Billion. TSMC, Samsung, Intel & China can afford to build them. (for context, Freedom Tower cost US$2 Billion.)
        • baq 5y ago
          I think in 2022 it’s more like 15B. 10 sounds very early-2020.
• sliken 5y ago
  > c. Electric vehicles consume an order of magnitude more chips than ICE cars. EV demand is also skyrocketing Source? My impression is just the opposite. Batteries and an electric motor is a relatively simple device compared to a gas motor. So you replace a fuel pump (and related sensors), cat converter (and sensors), transmission (and sensors), and a hugely complex (1000s of parts) engine (and sensors). Managing maximum efficiency, torque, and HP across the entire RPM range while minimizing emissions is quite an intensive process. Not to mention the interaction between the engine and the (compute controlled) transmission. Especially these days when the simple rules are gone and managing turbos, heat management, etc means that you might give maximum HP, but only for 5-10 seconds or even idling unneeded cyclinders, stopping the engine at redlights, etc. Tesla in particular as moves many distributed chips into a highly integrated single board, various people (like Monroe on Youtube) claim the Tesla model3 has a market leading level of integration replacing dozens of distributed CPUs with a custom board/ASIC.
  • phkahler 5y ago
    I used to work in EVs (and tangentially still do). They really only require some power electronics - gate drivers and IGBTs - in addition to the normal bunch of chips all over the vehicle. So even if demand was "skyrocketing" rather than being a tiny fraction of the market, they shouldn't impact the demand for chips on regular cars.
    • 11thEarlOfMar 5y ago
      EVs require 2.3x the chips of ICE. (not orders of magnitude, apologies for the hyperbole) https://www.idtechex.com/en/research-article/ev-power-electronics-driving-semiconductor-demand-in-a-chip-shortage/24820 https://www.idtechex.com/en/research-article/ev-power-electr...
      • sliken 5y ago
        Interesting, and weird. Although that's measured by $, not per chip, per per mm^2 of silicon. I suspect electric cars (being newer designs) tend to use much newer chips, where the traditional ICE manufacturers are often using many generation old processes and paying rock bottom prices. So during shortages the cheap chips don't get made as fabs migrate production to the most profitable/newer chips. Based on the tear downs I've seen I believe the 2000+ chips in the model S/X, but would be surprised if a model 3/y even had as many as 1000 (the number in a ICE vehicle). The model S/X were crazy complex, CPUs for each door lock, each window motor, each windshield motor, etc. As a result VW, Ford, GM, Chevy, etc have to halt production lines, while Tesla has a record year.
• x0x0 5y ago
  Also, the Texas storms caused hard power cuts to multiple chip factories, erasing, in the best case, a full month of chip production as they slowly restart the factories [1]. These chips are, btw, generally built on such old tech that Intel is refusing to fab them [2]. So I would have thought a chip was a chip, but apparently car chips can only be sourced from a handful of specific fabs. Car manufacturers are clearly going to start building huge inventories of them though: > “Because of a 50-cent chip, we are unable to build a car that sells for $50,000,” said Murat Aksel, head of procurement for Volkswagen Group, during a press briefing in Munich last week. [2] Ouch. Though honestly, this probably ought to result in some execs being fired... If you sell 100k cars a quarter, imagine telling the board that you saved the interest on $200k and the rent on a small room and that's why you're not selling a vehicle. [1] https://www.reuters.com/business/autos-transportation/texan-chipmakers-face-slow-recovery-power-crisis-shortage-looms-2021-03-02/ https://www.reuters.com/business/autos-transportation/texan-... [2] https://fortune.com/2021/09/17/chip-makers-carmakers-time-get-out-semiconductor-stone-age/ https://fortune.com/2021/09/17/chip-makers-carmakers-time-ge...
  • bsder 5y ago
    > Ouch. Though honestly, this probably ought to result in some execs being fired It should, but it won't because everybody failed the same way. It was just like the 2008 banking crisis. Lots of people saw it coming, but reasoned "If I predict doom and mistime it, I'm an outlier and get fired. If I simply keep my head down and cash out and it all goes pear-shaped, I'm simply one of the masses and nobody will notice me."
• UncleOxidant 5y ago
  Also 4: There's been underinvestment in the sector for years now. Lots of money got plowed into stuff like social media, crypto/blockchain & ML but semiconductors just weren't sexy to the investors.
  • dymk 5y ago
    I don’t really buy this idea that chip fabs were being starved of money because of blockchain. Do you have any evidence to back your claim up?
    • haneefmubarak 5y ago
      It's not so much that chip fabs were starved by blockchain as much as the fact that many investors generally chase high short-term low-risk yields, which primarily results in major investments being in software-based ventures. Hardware can yield quite large gains too, but the upfront risk is much higher and. the growth rate is slow (if at all nonzero) for a long time before actually growing.
    • rossdavidh 5y ago
      The chip fabs of Intel, Samsung, TSMC, and a couple other companies were not being starved, no. But, nobody was starting new semiconductor fab companies like they did in the early days of Silicon Valley (hence the "silicon" part of the name). That hasn't been happening for a couple decades now.
      • UncleOxidant 5y ago
        > The chip fabs of Intel... were not being starved, Maybe, but consider that Intel stock was pretty flat for a long time in the 2000s/2010s especially compared to the amount of money that was flowing into the FAANG stocks and other social media companies during that time. If Intel's stock had rising at something like those rates they probably would have been able to invest quite a bit more into fabs.
        • 5y ago
• eb0la 5y ago
  True, but I believe there is also a missing factor: When people wasn't able to get outta home, demand for cars plummeted. And whoever made ICs as for cars just had the opportunity to fill the gap from automakers with more lucrative parts.
  • jasonwatkinspdx 5y ago
    Ironically enough demand for cars went up during COVID. I can't tell you why, but I know it's a fact. Lack of supply is certainly a factor but I think there's probably more going on. Go check how insane the market is right now. It's nearly impossible to buy a new car, and used cars are selling at way above the notional blue book value.
    • frutmonkey 5y ago
      Demand did go up, after the market adjusted to projections that with everyone in lock-down, demand for cars would go down. Demand for in home entertainment was projected to go up. Auto makers sold their capacity to people who were projected to use it in lock-down friendly ways. Once reality set in it was to late to get the capacity back.
    • jcadam 5y ago
      We sold two cars and bought one new one. Remote work and a move to a rural area meant we had more cars than we needed, and that we needed to replace our city cars with something more rugged/utilitarian.
  • midjji 5y ago
    One thing I heard from a guy working on chip for a big German car company was that they used to have a decades old contract with a major Taiwanese chip manufacturer which had extremely good terms for the Germans. In particular with terms to delivery times, and fees for late deliveries, and price. This deal had apparently been used as a framework for the purchase of not just the then used chips, but pretty much all latter ones too. In retrospect the deal seems to have been at the very least partially politically motivated by Taiwan, but the chip manufacturer could not cancel the framework agreement without significant penalties. There was however an option for the car manufacturer to cancel quite freely, and when the news of the pandemic hit, they did. It seems like no one in the department quite understood just how extremely good the conditions had become over the decades, and after they canceled it, and decided they wanted the same deal back... Well lets just say they are at the back of the line despite paying substantially more than they used too.
• chrischen 5y ago
  Non EVs also need a lot of silicon for infotainment, driver assist, etc. it’s not just EVs demand that is skyrocketing. All cars are.
• jnwatson 5y ago
  Good list. Also, Taiwan drought and Texas freezing impacted some fabs last year.
  • tuatoru 5y ago
    And the fire in Ajinomoto's factory that makes Ajinomoto Buildup Film, used in high-end chips, briefly cut production of those. I vaguely recall a shortage of epoxy resins as well. (For packaging chips, and for printed-circuit boards). It seems like more went wrong than usually does in 2020-21, even leaving aside the pandemic.
• baybal2 5y ago
  I became 3400 dollars richer buy selling few old unused stm32 reels
• deleted 5y ago
  [deleted]