Everything you need to know about the global chip shortage

Market Dynamics

The semiconductor market is divided into two distinct segments: leading-edge chips and commodity chips. Willy Shih explains that leading-edge chips are used in high-performance devices like smartphones and computers, while commodity chips are older, cheaper, and used in everyday electronics like TVs and cars 1. This distinction is crucial, as many industries fail to differentiate between these markets, leading to issues like double ordering and hoarding during supply shortages.

I think you highlight a very important point. There are really two different worlds. There is the leading edge, as you described, and that is mostly chips that go into smartphones, computers, data center stuff, you know, high performance chips.

--- Willy Shih

The 2011 Tohoku earthquake highlighted the vulnerability of supply chains, prompting companies like Toyota to maintain larger chip inventories, a strategy not widely adopted by American manufacturers 2.

   

TSMC's Impact

TSMC, a pivotal player in the semiconductor industry, has mastered the foundry model, producing chips for various companies globally. Their relentless focus on scale and efficiency has positioned them as a leader, especially in advanced chip manufacturing 3. This dominance raises questions about the geopolitical implications of chip production, particularly the reliance on Asia for manufacturing.

They should look at TSMC as somebody who is doggedly persistent. TSMC was spun off from ITRI, the Industrial Technology Research institute, Taiwan, in the 1980s, pursuing this foundry model.

--- Willy Shih

While the U.S. aims to bolster domestic chip production, Willy Shih cautions against underestimating the complexity of global supply chains and the interdependence of international markets 4.

   

Intel's Strategy

Under new leadership, Intel is making strategic investments to regain its position in the semiconductor market. CEO Pat Gelsinger has committed over $20 billion to new fabs in Arizona and New Mexico, signaling a willingness to take risks and innovate 5. This move is part of a broader strategy to compete with TSMC and other industry leaders.

I think intel, under their new CEO, Pat Gelsinger, is going to spend the money. They've already committed 20 plus billion to two new fabs in Arizona and New Mexico.

--- Willy Shih

However, Willy Shih notes that significant financial investment is required to truly compete with TSMC, as their scale and spending have been unmatched for decades 6.