ROUNDUP: The Chip Shortage Gets... Different?
I wanted to say better, but it's really just evolving.
Previously on "The chip shortage"
When lockdowns swept the world, companies bet that folks would stop buying as many things, especially cars.
Folks bought a lot more things, and returned to buying cars a lot faster than xpected.
The disruption to the normal patterns of shipping caused all kinds of problems in logistics, like too many cargo containers in one port and not enough in another.
Shortages in components caused companies to try to stockpile parts, buying more than they normally would. AKA , the toilet paper effect.
Weather anomalies, like the ice storm in Texas, drought in Taiwan, and fires in Japan complicated an already difficult situation.
A war started in Ukraine, disrupting supply chains even more.
Inflation started changing consumption patterns again.
That bring us to now.
Companies are dealing with uneven component supplies, full warehouses and dwindling consumer demand.
Let's focus on two cases that point where we may be heading.
First, automakers are going to be more involved in chip design, meaning better electronics in your car but also high costs. TSMC CEO C. C. Wei told Reuters he never got a call from an auto executive until the shortage got bad. Now car makers and chip makers are working side by side. This gives automakers more visibility into the supply chain but costs them more.
Emergency measures put in place to deal with the shortage are now becoming permanent. Parts suppliers like Bosch and Denso are spending on increasing chip production and companies like GM and Stellantis are taking part in chip design. Ford struck a deal with Global Foundries. Chipmaker Skywater Tech is asking automakers to buy equipment or pay for R&D.
Japan's Renesas Electronics and Dutch NXP Semiconductor are co-locationg engineers to help automakers design new architecture from the ground up for better efficiency. This brings them closer to Tesla which designs its own core chips. And it means there will be more chips in cars. Reuters says the number of chips per car in 2026 is expected to be double what it was in 2020.
So automakers have reached a new normal with better but more expensive chip design. Reuters also reports on another case that seems a more straightforward effect. Consumer demand has dropped leaving inventories to stack up.
Now to the second case.
Reuters reports that Samsung scaled back production in Vietnam where it has six factories in two major hubs that put out around half of Samusung's smart phones. One campus in the north of Vietnam can make around 100 million devices a year out of Samsung's 270 million. A worker at that campus told Reuters they are not only cutting overtime but going down from 6 day work weeks to four and sometimes three. Samsung told Reuters it is not reducing it annual production target but Reuters could not confirm if that meant it was shifting output to its Indian and South Korean plants. Managers told workers at the plant that the inventories are high, hence the reduction in output. So it may be that Samsung suddenly realizes it has enough units to meet demand and demand is stagnant.
The takeaway here is that we may be headed for a glut of electronics in some sectors and higher costs in others. Sometimes both.
Here are other notable topics I covered this week.
- Guests are paying to be on Podcasts
- One User Always Gets Shut Out if You Fight Network Congestion
- Valve’s SteamDeck Comes to More Countries
- Warner Brothers Shelved Batgirl and Scoob 2 For Tax Reasons
- Should Textbooks Become NFTs?
- Samsung and IFixit Launch Repair Program
- WiFi 7 Coming to Intel-based Laptops in 2024
- Winamp Is Back!
- Uber Is Cash Positive
- The State of Brain-Computer Interfaces
- Google Asks Employees for Ideas On How They Can Work Harder
- TikTok Might Be Working on a Music Service
You can read full writeups of these if you’re a paid subscriber to the substack.
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