4 ms·

A few months ago, I posted that here that governments around the world should not interfere with the chip industry just because of the covid-induced shortages.

A few months ago, I posted that here that governments around the world should not interfere with the chip industry just because of the covid-induced shortages. The reason is that supply and demand will naturally sort things out and that any government handout to chip companies to increase capacity will be wasted because chip demand will swing the other way. The chip industry is now swinging the other way.

gergoe 4y ago
- Quindecillion 4y ago
  - Dawnyhf5t 4y ago
  - cxr 4y ago
    Please just downvote these comments (and then flag them if you can), rather than replying. If you aren't able to downvote or flag them, then please still abstain from responding. It will get killed eventually, but replying brings undue attention, thwarting the point of moderation.
noja 4y ago
I'm not sure that makes your prediction correct, you need to give a timeframe too. Without a timeframe, it's just waiting until you are right.
yvdriess 4y ago
The current slump seems purely caused by a demand drop. It will take years to see the capacity increase because of those government investments. By then, we will hopefully be out of this recession.
- senttoschool 4y ago
  The chip manufacturing industry would have spent their own money building fabs based on demand projections. Government money (my tax money) does not need to interfere and give free money to them. This is my point.
  - yvdriess 4y ago
    I get your point, but it seems to ignore the geopolitics involved in something like the CHIPS act. Those government investments are not to save the poor struggling semi industry, it is a strategic move to limit overseas dependencies in a supply chain that is seen as critical for the MIC and the economy at large. You are right that those semi companies do not need the government investments to build fabs. However, those fabs materialize overseas, depending on overseas supply chains. The EU and US regions want to build out more of the supply chain domestically, for strategic reasons. Those governments could simply legislate to impose heavy restrictions, but that hurts the competitiveness of the companies involved. And so, they combine that stick with a carrot, which is the government investments. You can already see increased restrictions on the semi supply chain in China, timed right after the CHIPS act passed.
Balero 4y ago
I think it is fair for a government to promote such a key industry to diversify where it is based. Currently a crazy percentage of chips are made in one geographical location. A huge amount of the modern economy is reliant on having cheap and easy access to these chips. This isn't a supply/demand decision by governments, but a strategic risk decision. Having some domestic/local regional (think EU based) chip manufacturing is going to be like having steel or food production. A strategic decision.
pzduniak 4y ago
As far as I understand, the primary reason for these investments is not to address the shortages, but to decouple Western nations from their reliance on Taiwanese silicon. Most of the remaining shortages - which are still happening in many industries, eg. heat pump shortages in Europe are mostly blocked by chip supply - are caused by the production backlog of the older/cheaper/different technologies. So the goal is political. The economy can take a hit to achieve it.
- tooltalk 4y ago
  Well, the foundry business is now a two-horse race between Samsung and TSMC. Intel, many believe won't make it. The US gov't knows it too -- that's why Trump arm-twisted TSMC to open new plants in Arizona. Samsung was making Apple's A's in Austin, Texas some time ago, but Apple ditched Samsung's US manufacturing in favor of their China/Taiwan-first offshore outsourcing strategy.
  - mschuster91 4y ago
    > Samsung was making Apple's A's in Austin, Texas some time ago, but Apple ditched Samsung's US manufacturing in favor of their China/Taiwan-first offshore outsourcing strategy. Apple runs an Asia-first strategy these days, they are divesting from China at top speed (whether that's due to sanction threats, the risk of operating in dictatorships, raising wages in China or a combination of that is up for debate). It doesn't make much sense for Apple economically and logistically to use US-made products as they have to be shipped across the ocean to the assembly plants.
    - phpisthebest 4y ago
      Apple should be investing in a North America first strategy and getting manufacturer for everything spun up here
    - tooltalk 4y ago
      >> ... they are divesting from China at top speed... I'm not entirely convinced that that's what Apple is doing. The Information reported[1] last year that Apple made ginormouse investments ($270+B) in China's domestic tech industry to train their workforce and foster China's tech manufacturing. That was 6-7 years ago. It was also revealed very recently that Apple was still trying mighty hard to source more materials and chip suppliers from China's domestic tech industry (eg, YMTC) in spite of the on-going US sanctions on MIC chips -- in this particular case with YMTC, Apple finally gave up only after the Biden admin expanded export control on YMTC last week[2]. I don't think Apple is deterred by Xi's dictatorship, China's geopolitical threats to Taiwan/the South Sea conflict with other SEA countries, or the Uigher (and other ethnic minoority groups) human rights concerns, despite their virtue signaling here in the US. Sure, I think the justification for Biden's foreign/trade policies is up for debates, but what is quite clear is that Apple hasn't really changed its China/Taiwan-first business practices. 1. https://www.theinformation.com/articles/facing-hostile-chinese-authorities-apple-ceo-signed-275-billion-deal-with-them https://www.theinformation.com/articles/facing-hostile-chine... 2. https://asia.nikkei.com/Business/Tech/Semiconductors/Apple-freezes-plan-to-use-China-s-YMTC-chips-amid-political-pressure https://asia.nikkei.com/Business/Tech/Semiconductors/Apple-f...
jtorsella 4y ago
I really don’t understand this. Chips are tangible goods, not services where, for example, a bunch of hospitality capacity went to waste during the pandemic. Any “extra” chips will go to use, and will only serve to reduce costs for firms and consumers purchasing them, expand the range of products it makes sense to put chips in and the speed and quality of chips companies can afford to build on. While market signals are the best way to determine these things in general, many of the reasons mentioned in the article - long spin-up times for production infrastructure, dependence on other countries with fraught geopolitical situations - are strong reasons to build reserve capacity, even setting aside the direct economic benefits.
- mschuster91 4y ago
  > Chips are tangible goods Many chips are not fungible, at least not for large-volume orders that incorporate stuff like customer specific mask ROMs or optimizations, and certainly for built-to-order stuff like Apple's SoCs. That means that let's say Apple can't just go and take a bunch of NVIDIA's chips and slap them into their products, and I'd even take a bet and say that manufacturers of NVIDIA cards can't easily take up cancelled order capacity for the same NVIDIA chip from other manufacturers.
  - jtorsella 4y ago
    Yes, that’s a good point. But it seems to me like that’s a matter of degree, right? Like, even stipulating that the chips themselves are not fungible across products and companies, they are fungible across time for the same or similar products. The price of your 2023 fridge, for example, could be lower because of excess supply of chips for 2022 models, no? And am I right in thinking that even if the chips themselves are not fungible (and there is a genuine possibility that excess production of specific chips goes completely to waste), excess productive capacity is good in and of itself despite some amount of specialization?
    - svnt 4y ago
      No. Chips don’t really expire, and suppliers often have to wean their customers off them by raising the prices regularly once they’re done acquiring design wins. If the chips went on sale every year then companies would gamble on additional stock at discount, driving revenue down, and further disrupting the sales transitions into new IC designs.
Proven 4y ago
guidedlight 4y ago
I saw this announcement being more guaranteeing US onshore chip fabs are being built as demand increase. The rise of TSMC has somewhat increased the national security risk as the market share has shifted away from Intel. We are seeing with the Ukraine War, a reliable domestic supply of semiconductors is now critical to national security. I expect Intel will continue to be helped along by the US government for some time.
bfung 4y ago
There’s gov intervention now, not due to shortage nor Covid related supply, but strategic moves that’s happening between US and China. With China having “seized” Hong Kong, and Russia invading Ukraine, flags went up signaling that the next major move in the future could be China invading Taiwan. And Taiwan is where the most advanced chips are made. In parallel news, playing with the open source AI models, it’s clear that GPUs are NEEDED in order to run these AI models. Ex: an Nvidia RTX3090 (low end of A100) can run Stable Diffusion in a couple minutes, while my 2013 MacBook Pro, cpu driven, takes ~4hrs to perform the same task. AI models applied to military uses is a game changer, as demonstrated by Ukraine equipped with US tech. Mitigating the risk of losing Taiwan, enabling production on US shore, and banning sales to China [1] would keep the economic and military advantage on the US side a bit longer than if things kept going the way they were. Chips might slump now, but GPUs are gonna be in hot demand, even w/o the blockchain use cases. As demonstrated by the open source AI models, we’re about to replace a lot of stock photos, news illustrations, logo services… and that’s just the beginning. [1] https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3158-2022-10-07-bis-press-release-advanced-computing-and-semiconductor-manufacturing-controls-final/file https://www.bis.doc.gov/index.php/documents/about-bis/newsro...
- hikingsimulator 4y ago
  You mention AI applications in Ukraine. Can you provide more information on that? Sounds like a rabbit hole.
- chernofool 4y ago
  Are you certain that AI is used in any of the tech that the US is sending to Ukraine? It's mostly cold war era equipment, designed around the '90s or earlier. Modern AI also seems very failure-prone for military applications around populated areas.
  - rank0 4y ago
    What about the air defense systems? Those things surely need advanced compute. There’s also drones, communications systems, electronic warfare systems, jets etc…
digianarchist 4y ago
The Economist made the same point a few months ago.

gergoe 4y ago

Quindecillion 4y ago
- Dawnyhf5t 4y ago
- cxr 4y ago
  Please just downvote these comments (and then flag them if you can), rather than replying. If you aren't able to downvote or flag them, then please still abstain from responding. It will get killed eventually, but replying brings undue attention, thwarting the point of moderation.

noja 4y ago

I'm not sure that makes your prediction correct, you need to give a timeframe too. Without a timeframe, it's just waiting until you are right.

yvdriess 4y ago

The current slump seems purely caused by a demand drop. It will take years to see the capacity increase because of those government investments. By then, we will hopefully be out of this recession.

senttoschool 4y ago
The chip manufacturing industry would have spent their own money building fabs based on demand projections. Government money (my tax money) does not need to interfere and give free money to them. This is my point.
- yvdriess 4y ago
  I get your point, but it seems to ignore the geopolitics involved in something like the CHIPS act. Those government investments are not to save the poor struggling semi industry, it is a strategic move to limit overseas dependencies in a supply chain that is seen as critical for the MIC and the economy at large. You are right that those semi companies do not need the government investments to build fabs. However, those fabs materialize overseas, depending on overseas supply chains. The EU and US regions want to build out more of the supply chain domestically, for strategic reasons. Those governments could simply legislate to impose heavy restrictions, but that hurts the competitiveness of the companies involved. And so, they combine that stick with a carrot, which is the government investments. You can already see increased restrictions on the semi supply chain in China, timed right after the CHIPS act passed.

Balero 4y ago

I think it is fair for a government to promote such a key industry to diversify where it is based. Currently a crazy percentage of chips are made in one geographical location. A huge amount of the modern economy is reliant on having cheap and easy access to these chips. This isn't a supply/demand decision by governments, but a strategic risk decision. Having some domestic/local regional (think EU based) chip manufacturing is going to be like having steel or food production. A strategic decision.

pzduniak 4y ago

As far as I understand, the primary reason for these investments is not to address the shortages, but to decouple Western nations from their reliance on Taiwanese silicon. Most of the remaining shortages - which are still happening in many industries, eg. heat pump shortages in Europe are mostly blocked by chip supply - are caused by the production backlog of the older/cheaper/different technologies. So the goal is political. The economy can take a hit to achieve it.

tooltalk 4y ago
Well, the foundry business is now a two-horse race between Samsung and TSMC. Intel, many believe won't make it. The US gov't knows it too -- that's why Trump arm-twisted TSMC to open new plants in Arizona. Samsung was making Apple's A's in Austin, Texas some time ago, but Apple ditched Samsung's US manufacturing in favor of their China/Taiwan-first offshore outsourcing strategy.
- mschuster91 4y ago
  > Samsung was making Apple's A's in Austin, Texas some time ago, but Apple ditched Samsung's US manufacturing in favor of their China/Taiwan-first offshore outsourcing strategy. Apple runs an Asia-first strategy these days, they are divesting from China at top speed (whether that's due to sanction threats, the risk of operating in dictatorships, raising wages in China or a combination of that is up for debate). It doesn't make much sense for Apple economically and logistically to use US-made products as they have to be shipped across the ocean to the assembly plants.
  - phpisthebest 4y ago
    Apple should be investing in a North America first strategy and getting manufacturer for everything spun up here
  - tooltalk 4y ago
    >> ... they are divesting from China at top speed... I'm not entirely convinced that that's what Apple is doing. The Information reported[1] last year that Apple made ginormouse investments ($270+B) in China's domestic tech industry to train their workforce and foster China's tech manufacturing. That was 6-7 years ago. It was also revealed very recently that Apple was still trying mighty hard to source more materials and chip suppliers from China's domestic tech industry (eg, YMTC) in spite of the on-going US sanctions on MIC chips -- in this particular case with YMTC, Apple finally gave up only after the Biden admin expanded export control on YMTC last week[2]. I don't think Apple is deterred by Xi's dictatorship, China's geopolitical threats to Taiwan/the South Sea conflict with other SEA countries, or the Uigher (and other ethnic minoority groups) human rights concerns, despite their virtue signaling here in the US. Sure, I think the justification for Biden's foreign/trade policies is up for debates, but what is quite clear is that Apple hasn't really changed its China/Taiwan-first business practices. 1. https://www.theinformation.com/articles/facing-hostile-chinese-authorities-apple-ceo-signed-275-billion-deal-with-them https://www.theinformation.com/articles/facing-hostile-chine... 2. https://asia.nikkei.com/Business/Tech/Semiconductors/Apple-freezes-plan-to-use-China-s-YMTC-chips-amid-political-pressure https://asia.nikkei.com/Business/Tech/Semiconductors/Apple-f...

jtorsella 4y ago

I really don’t understand this. Chips are tangible goods, not services where, for example, a bunch of hospitality capacity went to waste during the pandemic. Any “extra” chips will go to use, and will only serve to reduce costs for firms and consumers purchasing them, expand the range of products it makes sense to put chips in and the speed and quality of chips companies can afford to build on. While market signals are the best way to determine these things in general, many of the reasons mentioned in the article - long spin-up times for production infrastructure, dependence on other countries with fraught geopolitical situations - are strong reasons to build reserve capacity, even setting aside the direct economic benefits.

mschuster91 4y ago
> Chips are tangible goods Many chips are not fungible, at least not for large-volume orders that incorporate stuff like customer specific mask ROMs or optimizations, and certainly for built-to-order stuff like Apple's SoCs. That means that let's say Apple can't just go and take a bunch of NVIDIA's chips and slap them into their products, and I'd even take a bet and say that manufacturers of NVIDIA cards can't easily take up cancelled order capacity for the same NVIDIA chip from other manufacturers.
- jtorsella 4y ago
  Yes, that’s a good point. But it seems to me like that’s a matter of degree, right? Like, even stipulating that the chips themselves are not fungible across products and companies, they are fungible across time for the same or similar products. The price of your 2023 fridge, for example, could be lower because of excess supply of chips for 2022 models, no? And am I right in thinking that even if the chips themselves are not fungible (and there is a genuine possibility that excess production of specific chips goes completely to waste), excess productive capacity is good in and of itself despite some amount of specialization?
  - svnt 4y ago
    No. Chips don’t really expire, and suppliers often have to wean their customers off them by raising the prices regularly once they’re done acquiring design wins. If the chips went on sale every year then companies would gamble on additional stock at discount, driving revenue down, and further disrupting the sales transitions into new IC designs.

Proven 4y ago

guidedlight 4y ago

I saw this announcement being more guaranteeing US onshore chip fabs are being built as demand increase. The rise of TSMC has somewhat increased the national security risk as the market share has shifted away from Intel. We are seeing with the Ukraine War, a reliable domestic supply of semiconductors is now critical to national security. I expect Intel will continue to be helped along by the US government for some time.

bfung 4y ago

There’s gov intervention now, not due to shortage nor Covid related supply, but strategic moves that’s happening between US and China. With China having “seized” Hong Kong, and Russia invading Ukraine, flags went up signaling that the next major move in the future could be China invading Taiwan. And Taiwan is where the most advanced chips are made. In parallel news, playing with the open source AI models, it’s clear that GPUs are NEEDED in order to run these AI models. Ex: an Nvidia RTX3090 (low end of A100) can run Stable Diffusion in a couple minutes, while my 2013 MacBook Pro, cpu driven, takes ~4hrs to perform the same task. AI models applied to military uses is a game changer, as demonstrated by Ukraine equipped with US tech. Mitigating the risk of losing Taiwan, enabling production on US shore, and banning sales to China [1] would keep the economic and military advantage on the US side a bit longer than if things kept going the way they were. Chips might slump now, but GPUs are gonna be in hot demand, even w/o the blockchain use cases. As demonstrated by the open source AI models, we’re about to replace a lot of stock photos, news illustrations, logo services… and that’s just the beginning. [1] https://www.bis.doc.gov/index.php/documents/about-bis/newsroom/press-releases/3158-2022-10-07-bis-press-release-advanced-computing-and-semiconductor-manufacturing-controls-final/file https://www.bis.doc.gov/index.php/documents/about-bis/newsro...

hikingsimulator 4y ago
You mention AI applications in Ukraine. Can you provide more information on that? Sounds like a rabbit hole.
chernofool 4y ago
Are you certain that AI is used in any of the tech that the US is sending to Ukraine? It's mostly cold war era equipment, designed around the '90s or earlier. Modern AI also seems very failure-prone for military applications around populated areas.
- rank0 4y ago
  What about the air defense systems? Those things surely need advanced compute. There’s also drones, communications systems, electronic warfare systems, jets etc…

digianarchist 4y ago

The Economist made the same point a few months ago.