Whether they are heating your coffee to precise temperature, regulating the battery in your smartphone, or maintaining safety, emissions, and engine controls in your vehicle, semiconductors (often referred to as chips) are in everything around us. Imagine a shortage of semiconductors that could last more than 2 years!
That’s exactly what Intel CEO, Pat Gelsinger warns us is happening. Much of the semiconductor fabrication (performed at foundries) is primarily driven by activity from only a small handful of companies, the raw materials required to make them come from all over the world, and engineering is heavily driven by talent in India, a country ravaged by COVID.
While many of these semiconductor parts are destined for developed countries, the players behind the materials, fabrication, and design are often in countries that have fewer resources to handle the threat of pandemic without permanently and profoundly affecting the future of their citizens.
Computer Parts
Here in the US and specifically in North Texas, we see long lines and demand for components like main processors (CPU) and graphics cards (GPU). Here’s an image of a massive line wrapped around Micro Center‘s Dallas location waiting for the chance to buy NVidia’s RTX 3080 (GPU), a card listed at $879 (USD). Scalpers on eBay are fetching $2000-2400 for similarly spec’d cards. Employees at Micro Center were unable to project how many cards would be available in Monday’s shipment (April 26, 2021).
Also in short supply is AMD’s line of 5000 processors, in particular the formidble 12-core, Ryzen 9 5900x. This in-demand CPU has a $549 MSRP and scalpers can sell them for $700-850.
The Auto Industry
As vehicles are increasingly loaded with processors, cameras, and other sensors, they are also increasingly affected by the chip shortage. According to KBB (Kelley Blue Book), the calculated value of some models we noted by 5-25%. Many car dealerships rely on this service to calculate trade-in values.
Unfortunately, KBB support says historical values are proprietary information they are unable to share with the general public. Although we cannot fully comprehend the value adjustment, we encourage readers to have a look at the value of their own vehicles.
As the time gap expands between ordering a chip and receiving it, there are massive implications for R&D, manufacturing, and the supply chain.
While just-in-time and globalism was always a point of weakness, the risks were normalized and disregarded. Pandemic and delays from events like the blockage at the Suez Canal have brought these systemic vulnerabilities front and center. Just-in-time was always risky.
As always, DallasComputer.io seeks to predict the implications of these forces on daily life and into the future. While the more immediate consequences of shortage are and could be catastrophic for many more sectors of the economy, those who warned of the risks were treated as Cassandra. Will tech executives learn from these painful lessons? Only time will tell.