There isn’t a finish in sight to the chip scarcity as provide chain issues pile up
Enlarge / A woman examines a mask – a part used in wafer design – in a showroom at the United Microelectronics Corp (UMC) factory in Tainan, southern Taiwan.
At the beginning of the year, the chip shortage seemed to subside sometime in 2022. Now this forecast seems to have been optimistic.
“The shortage will last indefinitely,” said Brandon Kulik, director of semiconductors at Deloitte, to Ars. “Maybe that doesn’t mean 10 years, but we’re certainly not talking about quarters. We talk for years. “
It is becoming clear that the confusion in the semiconductor supply chain is weighing on economic growth. Yesterday, both GM and Ford said missing chips would have resulted in drastic profit cuts for the third quarter, and Apple is rumored to be cutting this year’s production targets for its line of iPhone products, the company’s cash cow. Chip problems are so widespread that a division at Wells Fargo believes the pressure will curb US GDP growth by 0.7 percent.
Not an easy solution
As with many delicate problems, the causes of the lack of chips are myriad, and none of them can be quickly resolved.
For one thing, people keep buying new phones, tablets, and laptops, and they continue to use network-heavy services like video streaming, video conferencing, and more, increasing data center usage. “Demand generally continues to grow in almost all markets,” said Kulik.
This appetite has collided head-on with a multitude of delivery bottlenecks. Recently, the substrates that make up printed circuit boards have become scarce. Compared to advanced semiconductors, PCBs are relatively low-margin and easy to manufacture. Most chip manufacturers don’t make their own chips, but without PCBs, semiconductors can’t communicate with other chips in a computer. The companies that make the boards don’t make much profit that they could reinvest in expanding production.
To make matters worse, a fire in a large substrate factory in July 2020 took a significant source offline. As a result, the PCB factory capacity is expected to lag behind demand in the years to come. The crisis has become so acute that Intel CEO Pat Gelsinger brought it up on his company’s recent conference call.
Even the richest semiconductor manufacturers in the world are overwhelmed and far from meeting demand. It takes years to build and optimize new fabs, and companies are reluctant to invest when they believe the surge in demand is only temporary. As demand increases, it is unclear whether or not it will persist beyond the pandemic. Companies are reluctant to invest in a new factory when the chances are it won’t run 70 percent of the time. Fabs are just too expensive.
“When you have 60 percent or 70 percent utilization, you are likely to lose money,” Robert Maire, president of Semiconductor Advisors, told Ars.
Leading factories cost about $ 5 billion to $ 10 billion, many times what they cost a decade or two ago. As manufacturing techniques evolve, the buildings themselves have become more expensive to build, and the machines that make the chips have become more expensive. The latest tools use extreme ultraviolet lithography, which is required to make chips with features smaller than 7 nm, and they sell for more than $ 120 million.