Cisco says computer chip shortage to last six months
bbc.co.uk
bbc.co.uk
https://semiwiki.com/semiconductor-services/298336-automaker...
Seems like a massive investment in something that isn't their core competency (at all) for a 6-month disruption that hits ~once a generation+. It'd be a lot cheaper to just pay a foundry for reserved capacity, to stockpile a year supply of chips, or engineer cars to have more options for chips.
Have you see infotainment UIs?
Edit: my point was actually how bad they are. Carmakers don't do tech well.
It’s all done by pushing a ton of pixels from a CPU that’s probably not older in process than 14nm.
> Have you see infotainment UIs?
> Edit: my point was actually how bad they are. Carmakers don't do tech well.
Android UI and Win 10 are also terrible. And at least Win10 comes from someone who claims a lot of experience in this field (although some claim that they just stole the ideas).
MacOS is pretty awful as well, just differently bad.
You mean like having open standards that consumers can plug-and-play their own devices into?
That's absurd. /s
How would auto makers vendor-lock consumers after that?
Owning your supply chain is a core competency. It's just that a few decades of relative global stability has allowed us to bury our heads in the sand in exchange for a few short-term optimizations.
Or, perhaps, they could ... like ... hold inventory.
Gasp! But that's just crazy talk.
Er, wait, that's exactly what Toyota did when they discovered that a semiconductor supply shock could kill their business.
I think it’s the exact opposite, supply chains have held up remarkably well. If I had believed some people here we would have been eating each other by now but apart from a shortfall in toilet paper things have been fine.
https://www.wastedive.com/news/ball-molson-coors-aluminum-ca...
EDIT: not trolling, i'm really curious. Fresh broccoli is available all year round everywhere and it is so much better than the frozen stuff. Why would anyone buy it frozen?
The vast majority of people in the world live within walking distance of a small neighborhood market.
I can see why fresh would be better if you were planning on eating the broccoli raw or perhaps steamed, but since I mostly use broccoli in soup or stir fries, it ends up fairly thoroughly cooked. In which case I don't believe I would notice a difference.
I purchase frozen vegetables (stuff like brocc, cauliflower, peas, carrots) because they come pre-chopped, last near indefinitely so I don't have to worry about finishing them before they rot, and whatever amount I want at that moment can just be poured out of the bag, pre-chopped, into whatever (usually single pot) meal I am making.
Stir-fry for one. Frozen release "tons" of water that just slams the heat to "0".
Fresh, dump it in and it cooks without adding water.
The only time I go for fresh broccoli is when making a stirfry or salads.
Something happened to the people in China who take 10-100 electronic parts manufactured there and turn them into 1, to deliver to assembly in the auto’s destination for the purposes of tariffs (by reducing the count of imported parts from 100 to 1). Because of the weird mechanics of manufacturing origin, which definitely affects how cars and networking equipment have to be made, this is my hypothesis for why we’re only hearing about these issues from a very narrow set of industries and not others.
In terms of what could have happened my bet is it’s going to be pretty horrible.
Yes
Without special RVC exception for car companies, some US made cars would have to be stamped as Made in China/Germany/Mexico as per rules of origin.
1. https://www.yahoo.com/news/ford-extends-shutdown-stellantis-...
Auto manufactures are spoiled, they get anything they want whenever they want from the Government every time they start crying. Whether it's multi billion dollar tax breaks (Ford, Oakville, GM Oshawa, etc), multi billion dollar Gov programs (cash for clunkers) at the tax payers expense or being allowed to screw their suppliers for billions through bankruptcy (GM).
Don't excuse their poor management, forecasting, greed for frailty of the global supply chain. It's not like a asteroid hit Taiwan.
Actually, Apple HAS done this. And it can kill a company.
For example: Peregrine Semiconductor who got bought by Murata in the aftermath.
(From https://www.benzinga.com/tech/14/08/4808511/peregrine-ceo-ji...)
Additionally, their lack of planning and foresight contributed to the larger semiconductor industry going into a panic, causing a purchasing frenzy that dried up all the channels.
People in the larger industry saw what happened with the automotive semiconductor segment and went, well... maybe I should just keep 1 year of all my critical ICs on hand just to be safe.
I agree with you that we need more fabs, but they need to be thought of as (from a US centric viewpoint) national security assets. The reality is that if we want significant infrastructure, we need to do major investment from the US Government to ensure they are built here in the US. There are either production minimum guarantees, subsidies on the construction or operational costs to basically cover the costs of having excess capacity.
I think it's also disingenuous to continue to refer to increased demand as shortages because the implication is that there was a shortfall in production. The reality is that there was an increase in demand and limited capacity.
Overall I'd say you're right. Capacity has so much inertia that it lags beyond the created demand. That isn't the fault of the foundries, it's just an artifact of unpredictable market behavior.
This is 100% of the issue. Those other two are issues with large business in general (tax breaks) or car dealerships (who pushed c4c).
The Big Three have been able to run their suppliers ragged through collusion because, for many suppliers, all they produce are car parts sold to The Big Three. Which means their production figures, profit margins, and general growth are completely at the whims of automakers. The few critical suppliers with a chance to get out of the industry are acquired.
The Big Three are learning the hard way that they don't have the kind of influence over chip makers that they do over their other suppliers.
https://www.reuters.com/article/us-japan-fukushima-anniversa...
Having not worked in the auto industry, but having worked in the logistics industry, I and many many others like me have consistently warned about global catastrophes like pandemics causing unforeseen consequences of the kind we're currently experiencing.
To say that it's "frustrating" that nothing has been done before now, and nothing will likely be done - when I've literally written detailed reports complete with advanced statistical analysis for my upper management - is a massive understatement.
Hopefully the next pandemic will be severe enough that society itself is disrupted to the point where "rich" people suffer, perhaps even die. For many readers, this comment will come off as "morbid" or perhaps even be misinterpreted as a "call to violence", but in reality, this is simply "logical" behavior (survival instinct) that would result in a truly massive supply chain breakdown, and humanity as a whole doesn't learn a lesson unless there's unbearable suffering involved. I imagine a pandemic that kills 10% of the people it infects instead of 1% would cause sufficient pain for "elites" who very wrongly believe themselves to be above such inconveniences to seriously rethink their desire for "profits"... especially when a bunch of poor people who can't hoard food all raid their little compounds and the resulting unpleasantness that will result from such an outcome. It's unfortunate that I have to wish for such a thing to make people reconsider something as simple as warehousing additional supplies for unforeseen circumstances, but clearly we're there.
"actually we see that demand continued to be high and the shortage will continue throughout this year and may be extended into 2022 also." C. C. Wei, TSMC CEO
"We expect it will take a couple of years for the ecosystem to make the significant investments to address these shortages." Pat Gelsinger, Intel CEO
Also, this is a deeply technical topic where BBC should cite engineers and industry veterans, not Dan Ives from Wedbush Securities.
It is sometimes humbling to remember that despite our technical advances we’re still subject to the forces of nature.
https://www.google.com/amp/s/www.bbc.com/news/world-asia-567...
https://www.google.com/amp/s/www.bbc.com/news/world-asia-567...
The car industry might have something to do with it also but it's by no means the only cause of Cisco's concerns.
Never mind that Cisco is an absolutely terrible partner and the telecoms realized they were getting almost nothing out of the deal, so after a few years the big telecoms all dumped them and went with white label factories in China while working with American companies like Intel and Qualcomm on large component orders to supply the factories. Which left all the small and mid-size telecoms in the lurch for a generational upgrade they were expecting (which is a lot of why Huawei has so much market share in 5G).
https://www.scmp.com/tech/tech-trends/article/3129611/us-chi...
In particular in China and South Korea.
I wonder when all this extra capacity translates into more supply?
Maybe China and South Korea will be alright, as they can focus on the Chinese market in a world bifurcated by the US-China Tech war, but for the rest of the world, it seems that a supply glut is sure to follow?
2019, though, not so much. All the capacity came online at the same time, there was oversupply, the price of 3D NAND plummeted, and the chip companies pulled back buying dramatically, sending the equipment suppliers from feast to famine, again.
I recall a 2-year period in the late '90s where the San Jose Mercury News headline in August read '1,000 Jobs Open at Lam and Applied' to one year later, 'Lam to Lay Off 1,500'.
Edited- typo.
I view it like the construction industry. I worked as a concrete/asphalt inspector for my local municipality in college and the cycles of the road repair industry are similar in my mind. In this world there are lots of "crews" that travel around the country following the work. They start in the south in the winter, and gradually work their way up to the north as the ground thaws and road construction can be done. They usually have a 2 week - 2 month contract in each town and then move on. No one area has enough work to keep them busy for a season. The industry is built on that ability to maximize work/profit and minimize downtime by moving from customer to customer as the work does also.
I view it as similar for many of us who do/have worked in semi. When there is a glut of work, it's all good. When there isn't there are hundreds or thousands of highly skilled, highly specialized folks needing work. Those folks/consultancies typically are able to pivot to other industries that need the same skillets readily and easily (like medtech, aerospace, automotive, etc.) and keep working during the slow period for semi. The alternative would be for semi equipment designers/manufacturers (like ASML, etc) to rely more on in house permanent workforces and less on contractors and subcontractors but I fear a fundamental change like that may not be sustainable from a cost standpoint. These companies already have huge swings in their workforce numbers every few years, often hiring or letting go hundreds or thousands at a time.
Edited - typo
South Korea, I don't know. The spike in equipment purchase certainly sticks out, maybe they (SK) expect to be able/allowed to supply the Chinese companies, that Taiwan can't/won't?
For some reason in early 2020 all the car industry execs were convinced that people would buy dramatically fewer cars in 2020, due to pandemic crashing demand. Because they have a religious aversion to holding any stock they decided to shift the risk over to their suppliers, fucking said suppliers over, as the car industry normally does when they expect demand shifts. The thing that made this particular time special as opposed to business as usual is that the car execs all got it wrong, because people bought way more cars due to pandemic rather than less, due to moving out of cities and avoiding public transit. So they fucked over their suppliers a second time by demanding all those orders back.
Now, suppose you're a supplier of some sort of motor driver or power conversion chip (PMIC) in early 2020. You run 200 wafers per month through a fab running some early 2000s process. Half your yearly revenue is a customized part for a particular auto vendor. That vendor calls you up and tells you that they will not be paying you for any parts this year, and you can figure out what to do with them. You can't afford to run your production at half the revenue, so you're screwed. You call up your fab and ask if you can get out of that contract and pay a penalty for doing so, and you reduce your fab order to 100 wafers per month, so you can at least serve your other customers. The fab is annoyed but they put out an announcement that a slot is free, and another vendor making a PMIC for computer motherboards buys it, because they can use the extra capacity and expect increased demand for computers. So far so normal. One vendor screwed, but they'll manage, one fab slightly annoyed that they had to reduce throughput a tiny bit while they find a new buyer.
Then a few months later the car manufacturer calls you again and asks for their orders back, and more on top. You tell them to fuck off, because you can no longer manufacture it this year. They tell you they will pay literally anything because their production lines can't run without it because (for religious reasons) they have zero inventory buffers. So what do you do? You call up your fab and they say they can't help you, that slot is already gone. So you ask them to change which mask they use for the wafers you already have reserved, and instead of making your usual non-automotive products, you only make the customized chip for the automotive market. And then, because they screwed you over so badly, and you already lost lots of money and had to lay off staff due to the carmaker, you charge them 6x to 8x the price. All your other customers are now screwed, but you still come out barely ahead. Now, of course the customer not only asked for their old orders back, but more. So you call up all the other customers of the fab you use and ask them if they're willing to trade their fab slots for money. Some do, causing a shortage of whatever they make as well. Repeat this same story for literally every chipmaker that makes anything used by a car. This was the situation in January 2021. Then, several major fabs were destroyed (several in Texas, when the big freeze killed the air pumps keeping the cleanrooms sterile, and the water pipes in the walls of the buildings burst and contaminated other facilities, and one in Japan due to a fire) making the already bad problem worse. So there are several mechanisms that make part availability poor here:
1. The part you want is used in cars. Car manufacturers have locked in the following year or so of production, and "any amount extra you can make in that time" for a multiple of the normal price. Either you can't get the parts at all or you'll be paying a massive premium.
2. The part you want is not used in cars, but is made by someone who makes other parts on the same process that are used in cars. Your part has been deprioritized and will not be manufactured for months. Meanwhile stock runs out and those who hold any stock massively raise prices.
3. The part you want is not used in cars, and the manufacturer doesn't supply the car industry, but uses a process used by someone who does. Car IC suppliers have bought out their fab slots, so the part will not be manufactured for months.
4. The part you want is not used in cars, and doesn't share a process with parts that are. However, it's on the BOM of a popular product that uses such parts, and the manufacturer has seen what the market looks like and is stocking up for months ahead. Distributor inventory is therefore zero and new stock gets snapped up as soon as it shows up because a single missing part means you can't produce your product.
So here we are. Shameless plug - email me if you are screwed by this and need help getting your product re-engineered to the new reality. There's a handful of manufacturers, usually obscure companies in mainland China that only really sell to the internal market, that are much less affected. Some have drop-in replacement parts for things that are out of stock, others have functionally similar parts that can be used with minor design adaptation. I've been doing that kind of redesign work for customers this whole year. Don't email me if you work in/for the car industry. You guys poisoned the well for all of us so deal with it yourselves.
Picking and choosing the scope, scale, and amount of the type of harm you're comfortable with certainly seems worthwhile, but pretending there is any option that is harm free seems like self deception. Even refusing to play (not living?) has side effects most would consider harmful - at least to those around you.
We all do it, directly or indirectly. It’s necessary to survive. It’s common for instance to not worry too much about the earthworms dying on the sidewalk after the sprinklers run. Most people would consider someone pretty weird if they didn’t drive because of the body count of insects on their windshield.
For example - everyone who drives is implicitly or explicitly saying the benefit to them outweighs the harm to those insects. Everything has a trade off.
Most life survives by eating other life (yes even Vegans), and even pure photosynthetic algae has to kill or crowd out (and starve) competitors and things that would kill and eat it, or they would no longer be alive.
It’s easy to be isolated from this reality, especially with modern life meaning we don’t need to gather, raise and/or kill our own food.
Nature is not (just) a national park with carefully curated trails and animals to snap pictures of when they grace us with their presence. It’s wild fight for survival and dominance - full of growth, birth, gore, beauty, and death.
Recognizing that someone’s trade off to make another country less strong (a ‘other’) in exchange for making themselves richer or their country more capable of doing the same in the future is important (one example) - say a defense contractor making a new weapon.
It is a specific mindset and trade off that we might not agree with it even find repugnant, but it is keyed off important survival needs and a fundamental part of the world and nature we are foolish to ignore.
What do you consider ok to harm, to get the benefits for the people or things you care about? At some point it might be worth making it concrete, it can be illuminating.
Presuming that human activity is not zero-sum regarding whatever system of values we take, it's clear cut that some activities are bad, period.
This makes the grandparent's examples clearer: coal production benefits some people now but hurts future generations disproportionately. Wars hurt all sides, and allow some of them partially recover, and never as far as if they joined forces. Car companies throw the whole semiconductor industry under the bus in exchange for not having to keep inventory.
In a huge simplification, it's self-destruction I'm talking about, not sacrificing little things to gain greater ones, like exchanging the lives of insects to feed a human cvilization (presuming you value humans more).
Of course, it's possible to construct an arbitrary system of values to justify your own arbitrary deeds as "survival" or "natural", but I don't find such systems convincing.
My point is that you are constructing your own arbitrary system relying on projections of the results of actions far into the future, and impacts that are purely hypothetical at this point - they might be true/accurate, or they might not. Someone is staking their own success or happiness based on if they think it’s true or not, and I can point you to many examples in the recent past where that was a severe evolutionary negative for many people.
Prisoners dilemma is a thought experiment/theoretical problem because in the real world, what people value, their own understanding of and perceived trustworthiness of others, and their own dispositions and habits means it might as well be talking about spherical cows.
If we get into a shooting war with China next year for instance, global warming is going to be pretty low on the problematic outcomes one could face. If a pile of coal (or billion barrels of oil) is what it takes for the US (or China, or any other nation) to survive, they will burn it without a moments hesitation.
We can all hand wring about if that hurts the global balance, and how it’s terrible, and game theory and all that - but if it’s a fight for dominance, survival, and resources it won’t matter. So far we’ve found enough common ground/everyone is getting rich enough helping each other out it hasn’t come to that. We can hope it never will.
Pretending that folks who are building tools, or capabilities, or working in the areas that would be necessary to survive if something like that happened seems willfully ignorant of the reality we’re in or incredibly naive, IMO.
Some folks make short sighted choices, lose a ton of money, screw people over (intentionally or not), etc. In my experience it’s usually due to environmental factors (regulation, market, competitive forces) strongly incentivizing it, or just plain not being able to predict the future.
That chaos and dumbness is not only inevitable, it happens everywhere. It’s fundamental to the human experience. It’s easy to be high and mighty, much harder to do it differently - and survive.
No, not really. Looking at the large scale, the Earth will burn up together with the Sun, and then we'll reach the death of the universe one way or the other.
Small scale, we have sustained businesses, economies, families, ecosystems. In those, prisoner's dilemma is real and testable.
I'm getting the impression that you're trying to draw some equivalency between all classes of harms, regardless of their magnitude. I do agree to a certain extent, but I can nary see an argument that would convince me that some options are just not singularly harmful.
As an example, me and my neighbour being paid to grow a field, at the cost of the field insects, versus me and my neighbour being paid to drive each other away and take over the land. One is clearly better than another if human well being is more important than that of insects.
If we fear the neighbour fighting us and we value survival, we must fight ourselves. That's the curse of the prisoner's dilemma, because giving up the fight yields a better outcome. I would call such a greedy "survival" approach naive and unfortunate.
If we value dominance above all, then fighting the neighbour is the better choice. I believe we have a word for such value systems: egoism.
It isn’t about dominance over all - it’s about survival and the complex intertwining of all the various strategies (good, bad, failing) being tried simultaneously with the hope that theirs wins. Sometimes it’s domination. Sometimes it’s teamwork. Sometimes it’s passivity.
As any individual player, you have to pick one - and sometimes it wins, sometimes it loses. Most strategies exist not because they are always ideal, but because having the selection is essential and necessary to long term survival in a fundamentally unpredictable environment. A species that only does one strategy at once is going to go extinct when the environment changes suddenly.
I’m definitely not equating all actions as equal, or saying everything has equal cost. I’m noting that nothing, including no action, has no cost, and that assuming a player in the game (you or someone else) will definitely lose or definitely win for a given survival criteria has a very low degree of predictive accuracy in the real world.
I gave the example of economies and ecosystems together with prisoner's dilemma to illustrate that we do indeed have a models that are accurate in predicting at least first order effects.
First order effects are not everything, of course, but it doesn't seem sensible to throw away our knowledge coming from game theory (or cybernetics? or plain life experience) and settle on not being able to predict which choices are net positive and which are net negative.
As with any estimation, there will be those that can't be evaluated with any certainty, but also clear winners and losers.
It is somewhat the same story as being described here - which is an article about a company that makes display drivers:
https://www.scmp.com/tech/tech-trends/article/3128421/how-sh...
If they know they can get away with their suppliers having to front all the cash, why not do it? If all their competitiors get away with it, they'd be fools not to as that is a lot of expense and interest they're eating and they'll need to make up for that somewhere.
I'm not saying the system isn't broken and/or that car manufacturers aren't jerks for monopolizing a scarce resource and putting other demands in tight spots. I'm just reading it as regular free market capitalism level broken, but it sounds like you're saying it's even more broken than that. This is a topic very relevant to my current interests so I truly do wish to understand it.
- When manufacturers change their minds quickly and pay the price to buy up a lot of slots last minute, they are effectively also "burning" some slots that will simply no longer add to worldwide production of anything? and
- Being such a big customer with a high variance in demand, the car industry have are making it nearly impossible for the rest of the market to make rational decisions based on long-term forecasts?
(It might sound like I'm stating the obvious here but I know how often I think I understand something but later turn out to have missed the mark completely anyway.)
" 5.12 ADJUSTMENT IN CAPACITY RIGHTS AND OBLIGATIONS. Unless otherwise agreed in writing by the Parties, any adjustment in the Buyers' Percentage Interests which results in a change in their Adjusted Percentage Interests (as defined in Subsection 1.1.3), shall not become effective for purposes of the Buyers' Basic Purchase Shares until the thirteenth (13th) week after the date upon which the adjustment in Percentage Interests occurs pursuant to the LLC Agreement, and unless agreed otherwise by TSMC and each Buyer under a Purchase Order, no such adjustment in Percentage Interests, when so effective, shall operate to cancel, amend or otherwise affect any Purchase Orders accepted by TSMC prior to the date that such adjustment in Percentage Interests is so effective."
https://corporate.findlaw.com/contracts/operations/purchase-...
I really want us to stop being so obsessed with cars, because no matter how useful they are to transportation, in my mind they just can't be worth the pain and damage they cause to our society...
Are you saying it's a different kind of bullying? What makes it different? You original comment really piqued my desire to understand this.
Selfish reason, I want to know if my Tesla order will be delayed.
Demand does seem to be growing to meet thier increasing production volumes though.
Hard to underestimate the impact of Musk's leadership when you see that result.
1) once in a century severe droughts in Taiwan force water rationing, chip production needs A LOT of water
2) stockpiling from China manufacturers (eg. Huawei) who want to mitigate real or potential US sanctions
3) generally higher demand in some sectors due to covid situation (incl. WFH and stimulus)
(1) is probably the major factor, with others exacerbating it, see https://www.bbc.com/news/world-asia-56798308
[1] https://www.bizjournals.com/phoenix/news/2021/03/02/taiwan-s...
[2] https://www.azcentral.com/story/news/local/arizona-environme...
You have to put your new fab someplace useful or you have to import everybody.
So, that cuts the number of places to a handful in the US.
Texas, because TI, AMD, NXP nee Freescale nee Motorola. Idaho, because Micron. Oregon, because Intel. Arizona, because Intel and NXP. New York, because IBM. California, because everybody.
If you're not doing massive R&D at the fab, you want cheap workers more than you want location to universities. That knocks out California and New York.
As we just found out, Texas has weather so maybe not a great place for a 24/7 fab.
Can you imagine TSMC personnel dealing with winter? So, probably not Idaho.
So, Oregon or Arizona. I suspect Oregon is more expensive than Arizona in the places you want to put a fab.
Why is that? I would expect chip production to be a relatively small scale process compared to almost any other industries, simply due to the small amount of material involved.
For example, how many CPU dies can you fit in a shampoo bottle or a pack of printer paper?
[1] https://www.sustainalytics.com/esg-research/investors-esg-bl....
Samsung only recently (end of March) got their fab up and running close to production levels. NXP was a bit faster on the draw, but even still there are likely to still be more issues than normal.
At the end of the day, not much to do except hope for the best and expect the worst.
[1] https://arstechnica.com/tech-policy/2021/04/global-chip-shor... [2] https://www.washingtonpost.com/technology/2021/04/13/intel-c...
They seemingly learned from a few other supplier disasters over the last decade, and were better-prepared to deal with shortages of critical parts from their vendors.
[1] https://duckduckgo.com/?t=ffab&q=semiconductor+wafer+dicing&...
I thought it was just expensive to tie up a lot of capital on inventory.
It might be a factor in very low priced bulk goods like gravel or something, but I would be shocked even then.
Can you supply an example ?
https://taxfoundation.org/state-business-inventory-tax-2021/
The issue is that when you become brittle supply chain wise, the only real answer is to stock more/buy more individually - which crushes the supply chain even more. Either that, or co-ordinated (gov't level often) rationing, which has it's own problems.
Usual hackernews bullshit.
The bigger reason is to turnover your inventory faster and use cash more efficiently. The most basic of finance education would tell you about this. There are measures of this called inventory turnover, just as there are measures for turnover on many many things inside a company that gives an idea of how efficiently they use cash. I have never in my life seen a financial model on the face of the planet consider inventory taxes primarily because they're a non factor. Income taxes are a much bigger factor.
HN is not usually biased against taxes which is the subtext I see in your original post. There are bad policies and unintended consequences to some taxes.
there is a phrase inventory tax that means unnecessary overhead but I’ve never come across an actual governmental inventory tax in any country or us state.
I'm in a red state with relatively tame property taxes but the taxes that do exist that count inventory as property prevent us from keeping appreciable inventory. Everything is a minimum 3 week lead time to buy and produce, usually more. I am pretty sure JIT slows down the economy in general.