Dick Pountain /Idealog 324/ 05 Jul 2021 09:56
During lockdown I’ve bought three new electronic gadgets, a new mobile phone, a new tablet and a new multi-effect guitar pedal. This wasn’t out of boredom but because the old ones had become unusably slow (phone) or noisy (pedal) or packed up altogether (tablet). I wonder how many VLSI chips that means I bought? I’d guess at least twenty, what with phone and tablet SoCs, signal processors in the pedal and heaps of memory. Most importantly, none of these were premium priced items, all costing below £150, which means they likely contain not the latest chips but rather the cheapest, fabricated using older processes. And there you have one cause of the drastic shortage of chips that the whole world is currently experiencing.
Moore’s Law is turning around to bite us on the arse: the cost of building fabs for new processes like the 5 nanometer used by Apple’s M1 CPU keeps rising exponentially, meaning that chips cost more and must be sold in higher-end kit to repay the investment.Taiwan’s TSMC, the world’s largest contract chip fabricator, earned over half of its 2020 revenues from top-end chips with feature sizes below 16nm, including the M1. At the same time putting chips into everything – cars, washing machines (pencil sharpeners soon?) – means demand for the very cheapest chips has exploded. These cheaper chips, made on older fabs, now sell for so little that there’s almost no margin left in making them, hence no one builds fab for the old processes any longer and demand is massively outstripping supply. Market forces are biting us on the other cheek.
(As an aside, this is not at all unheard of by economists. Think of the airline industry. Concorde was state-of-the art, able to whisk 100 passengers to New York in three hours for several thousand pounds a head. It was ultimately killed off not by cost of purchase, noise regulations or US regulatory machinations but by Boeing’s 747 Jumbo which carried four times as many at less than half the speed for a tenth of the fare.)
The economics of new fab isn’t the only cause of the shortage: ‘Acts of God’ like fires destroying Taiwan fabs and the COVID-19 pandemic all take their toll too. And the shortage doesn’t look like slackening any time soon because no-one is building new fab for old processes yet. The MIT Technology Review reports that: “Automakers have been shutting down assembly lines and laying off workers because they can’t get enough $1 chips. Manufacturers have resorted to building vehicles without the chips necessary for navigation systems, digital rear-view mirrors, display touch screens, and fuel management systems. Overall, the global automotive industry could lose more than $110 billion to the shortage in 2021”.
China, lagging as it does behind the US design edge, however possesses quite a lot of old fab which might have interesting geo-political consequences – President Biden is already getting antsy, signing executive orders to approve a $50 billion boost for strategic semiconductor manufacturing, research and supply-chain protection. That won’t relieve the shortage in the short or medium terms, given the time it takes to build fab and that the US has exported almost all its capability to the Far East.
A couple of weeks ago at the CogX 2021 AI conference in King’s Cross I heard Nvidia CEO Jensen Huang talk about his company’s takeover of ARM. I was appalled when the UK government allowed the firm to be sold abroad, first to SoftBank and now to Nvidia, but Huang explained their commitment to working with the EU (irony alert) to build a state-of-the art supercomputer called Destination Earth for climate simulation, and another called Cambridge-1 in the UK. Far from wanting to move ARM out of Cambridge, he wants to invest and expand it there. Wearing my cynic's hat I might have thought “he would say that wouldn't he”; in historian's hat I may have thought “Frank Whittle and the jet engine all over again”; but in my realist's hat I actually thought “ARM’s probably safer with this guy than the clueless shower currently running the country”. ARM had decided decades ago that fabrication was a mugs’ game, and preferred to license the IP of its low-power cores that drive many, if not most, of the cheap chips that run mobile phones and IoT smart devices.
Where does this all leave Intel I hear you ask? Are its days as a mass-market CPU vendor numbered? Will it need to slog it out with Nvidia and AMD at the supercomputing end, using its Rocket Lake and Ice Lake CPUs and GPUs. Climate change simulation could be the last happy hunting ground for fat, government-assisted margins.
[Dick Pountain pretends to have known that gadget prices will soon be rising]
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