TSMC Says a Shortage of Commodity Chips Is Disrupting Trillion-Dollar Industries

News
By Anton Shilov
published

If you don't have a $10 chip, you can't ship a $150 million lithography scanner.

Arm
(Image credit: Arm)

Modern machinery uses loads of chips to enable their advanced functionality. There is nothing surprising here as almost all kinds of devices use electronics components nowadays, particularly logic chips. But there is a problem, as the lack of commodity chips that cost dollars or even pennies can disrupt shipment of a $50,000 car or a $150 million lithography scanner.

The global automotive manufacturing industry received $2.86 trillion in revenue in 2021, according to Statista. Every car uses hundreds of chips these days and that number is set to grow to over 1,500 in the coming years as vehicles become autonomous. But that means that the growing auto industry will depend on chip supply and the semiconductor industry even more than it does today, which is why they have to take chip supply more seriously than ever.

Car makers are not the only manufacturers to suffer from chip undersupply. Even ASML, which is the world's largest maker of lithography scanners — which are used to make chips — has suffered from chip shortages.

"When carmakers told me previously that they were short of semiconductors, I thought, 'How come these guys couldn't understand the importance of chips,'" said CC Wei, chief executive of TSMC, at an event in China, reports New Kerala. "But later, TSMC's own equipment suppliers suffered delivery problems and told me it is also due to component and chip shortages."

The market of semiconductor manufacturing tools is also huge and multifaceted. If TSMC cannot get an ASML extreme ultraviolet (EUV) lithography scanner or an Applied Materials deposition tool on time, its huge $20+ billion fab will stand idle. Ultimately, other suppliers of fab tools as well as TSMC's customers will suffer, so supply chain management will get even more crucial tomorrow than it is today.

Snowballing demand for semiconductors will ultimately lead to an increase in their prices in general, as companies like TSMC have to build new production capacity. As a result, prices of actual goods will increase as well. Meanwhile, since logistics is getting more complicated, this will affect pricing too. All-in-all, electronics is going to get more sophisticated, but also more expensive in the coming years, the executive of TSMC warned.

"The age of an efficient, globalized supply system has passed," said Wei, reports Bloomberg. "Costs are swiftly rising, including inflation."

Anton Shilov
Anton Shilov
Freelance News Writer

Anton Shilov is a Freelance News Writer at Tom’s Hardware US. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

28 Comments Comment from the forums
  • Giroro
    Where are all the chips going, if not to the companies that normally buy them?

    Every company on earth is blaming all of their problems on "the supply chain" but none of them are actually explaining what's actually going on. Where's the bottleneck?

    I don't think TSMC is self aware that they just tried to just tried to circularly shift blame for the chip shortage onto the chip shortage.
    Reply
  • Kamen Rider Blade
    The problem seems to be "Basic Commodity Chips" on much older nodes.
    Reply
  • shady28
    Nobody's investing in 120, 90, 65, 45 nm nodes.

    That's the problem.

    Investing too much into 7, 5, 3nm nodes winds up being a mis-allocation of capital.

    You can make a really fast CPU, but you can't make the motherboard, monitor, mouse or a keyboard to go with it.
    Reply
  • InvalidError
    Giroro said:
    Where are all the chips going, if not to the companies that normally buy them?
    Full-HD touch-screen toasters and a bunch of other things like that which are getting "smartified" just for lols.

    If you compare the average mainstream vehicle today vs mainstream vehicles from 30 years ago, we're likely looking at ~50X more electronics since practically everything in modern vehicles is controlled by wire and electrically-powered, especially on EVs where mechanical power from a drive belt or vacuum doesn't exist unless created by electrical means. With advanced driving assists and quasi-self-driving requiring 10s of TFLOPs, you also have relatively high-end compute on board those models. Between the assist computer, all of the cameras and support sensors, all of the vehicle systems actuators that must be available for computer control, etc., that is hundreds of extra chips and jellybeans semiconductors..
    Reply
  • JamesJones44
    Giroro said:
    Where are all the chips going, if not to the companies that normally buy them?

    Every company on earth is blaming all of their problems on "the supply chain" but none of them are actually explaining what's actually going on. Where's the bottleneck?

    I don't think TSMC is self aware that they just tried to just tried to circularly shift blame for the chip shortage onto the chip shortage.

    It's the explosion of use. When I started my career I was an embedded software engineer for vehicle ECUs (Electronic Control Units, or what uninformed people call them "the car's chip(s)"). When I started most cars had 2 or 3 of these ECUs all with a 3 to 5 of semiconductors per control unit to control operation of the Engine, Transmission and AirBag. When I left 12 years ago that number had exploded to well over 40 ECUs on mid to high end vehicles. These days they are pushing 80+ and it's only getting growing in number. In roughly 23 years the number of semiconductors in a vehicle has gone from about 15 to 250+, that's a 16.5x (1650%) increase in 23 years and the numbers just keep going up. This is also just automotive, there are plenty of other industries like Aviation, Defense, Manufacturing, Computing, etc. that have all had similar explosions in semiconductor demand.

    The bottleneck to answer the question directly is at the lower end of the semiconductor scale (120 nm, 90nm, etc.). For many of the applications listed above they don't need top of the line 3nm semiconductors to operate, but the margin for semiconductor makers is at that high end, not the low end. Semiconductor makers don't make a lot of money on 50 cent 120nm chips, they do however make a boat load of money on $700 5nm CPUs making headlines.
    Reply
  • InvalidError
    shady28 said:
    Nobody's investing in 120, 90, 65, 45 nm nodes.
    There is a very simple reason: it makes no sense to waste money on antique equipment that limits your ability to make finer stuff when 22-32nm equipment is much easier to come by, is more flexible and can still be used to make 1200nm stuff if needed, you just skip resolution enhancement tricks while preparing masks and the extra exposure passes they may require during lithography.
    Reply
  • shady28
    InvalidError said:
    There is a very simple reason: it makes no sense to waste money on antique equipment that limits your ability to make finer stuff when 22-32nm equipment is much easier to come by, is more flexible and can still be used to make 1200nm stuff if needed, you just skip resolution enhancement tricks while preparing masks and the extra exposure passes they may require during lithography.

    ASML still makes that equipment.

    You're ignoring the massive uplift in cost to develop a chip on new nodes. A full SoC can cost $500,000,000 to put on a 5nm node.

    A lot of the smaller chip vendors count revenue in the tens and hundreds of millions.

    It's simply not viable to port something they already have to 28nm for example, when they only sell 1million $5 chips per year ($5,000,000). The ROI just is not there.

    Reply
  • gg83
    Its like the snake eating its own tail
    Reply
  • Kamen Rider Blade
    Giroro said:
    Where are all the chips going, if not to the companies that normally buy them?

    Every company on earth is blaming all of their problems on "the supply chain" but none of them are actually explaining what's actually going on. Where's the bottleneck?

    I don't think TSMC is self aware that they just tried to just tried to circularly shift blame for the chip shortage onto the chip shortage.
    We don't need IoT. Most of that stuff is junk that will go in the landfill soon enough.
    Reply
  • InvalidError
    shady28 said:
    ASML still makes that equipment.
    Or does it? When the differences between models are little more than higher precision wafer table positioning, higher precision wafer leveling, higher precision alignment sensors and other tiny yet still critical tweaks when dealing with nanometers, I wouldn't be surprised if all the DUV variants sold today were the same machine adapted and certified to be a drop-in replacement for older ones.

    shady28 said:
    You're ignoring the massive uplift in cost to develop a chip on new nodes. A full SoC can cost $500,000,000 to put on a 5nm node.
    It isn't the node that costs R&D time, it is the amount of extra stuff that tends to get crammed into chips as processes shrink. A 80486DX's ~1M transistors would require approximately the same amount of R&D work regardless of whether it is ultimately made on 1um or 5nm.
    Reply