Come Together: Manufacturers Work to Offset the Chip Shortage

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With Forrester predicting a protracted semiconductor shortage that could last until 2023, electronics manufacturers are finding new ways to help offset the problem and right a supply chain that’s been disrupted by several different factors. “Capacity has been increasing but not nearly fast enough to keep up. The pandemic temporarily shut down chip fab capacity,” Forrester’s Glenn O’Donnell writes in “The Global Chip Shortage Won’t Ease Soon.”

“This caused a backup similar to the impact of the Ever Given fiasco on the Suez Canal. That chip backlog is still taking time to flush through,” he adds. With demand for chips expected to remain high as supply stays constrained, the research firm expects the shortage to last through 2022 and into 2023.

“The PC surge will soften a bit in the coming year but not [by] a lot,” O’Donnell writes. “Data center spending will resume after a dismal 2020, and edge computing will be the new ‘gold rush’ in technology. Couple that with the unstoppable desire to instrument everything, along with continued growth in cloud computing and cryptocurrency mining, and we see nothing but boom times ahead for chip demand.”

Doing their Part

Chip makers aren’t waiting around for the situation to correct itself on its own. This month, for example, Intel announced that it was investing $3.5 billion in a New Mexico chip manufacturing plant (aka, a “fab”) upgrade and also building two new facilities in Arizona. According to CNET, the upgrade will create 700 new jobs at the site over the next three years, along with 1,000 new construction jobs (for work starting in 2021).

“We’re proud to have invested in New Mexico for more than 40 years and we see our Rio Rancho campus continuing to play a critical role in Intel’s global manufacturing network in our new era of IDM 2.0.,” Intel’s Keven Esfarjani said in a company press release.

With this advanced 3D packaging technology, Intel can build processors with compute tiles stacked vertically, rather than side-by-side, providing greater performance in a smaller footprint. This also allows Intel to mix and match computer tiles to optimize for cost and power efficiency.

“The move from system-on-chip to ‘system on package’ will enable Intel to meet increasing computing performance needs for artificial intelligence, 5G and the edge,” the company states in the press release.

CNET says that investing in new chipmaking plants is part of a major Intel effort to restore Intel’s competitiveness under its new CEO, and that the firm is also going to start building chips for other companies via a foundry setup. “At the New Mexico fab, Intel will increase use of a processor packaging technology called Foveros that Intel debuted in 2018 and first used in an efficient but uncommon chip code-named Lakefield,” CNET reports.

Come Together

Intel certainly isn’t alone in its attempts to help eliminate the chip shortage. Also this month, a cross-sector alliance of semiconductor companies and downstream users of semiconductors converged to form the Semiconductors in America Coalition (SIAC). As a group, it called on congressional leaders to appropriate $50 billion for domestic chip manufacturing incentives and research initiatives.

According to an SIAC press release, the group’s mission is to advance federal policies that promote semiconductor manufacturing and research in the U.S. to strengthen America’s economy, national security and critical infrastructure.

“Semiconductors are the brains of the systems and technologies that enable America’s economic growth, national security, digital infrastructure and global technology leadership,” John Neuffer, president and CEO of the Semiconductor Industry Association (SIA), said in the release.

“Leaders from a broad range of critical sectors of the U.S. economy, as well as a large and bipartisan group of policymakers in Washington, recognize the essential role of semiconductors in America’s current and future strength,” he continued. “The Semiconductors in America Coalition looks forward to working with Congress and the Biden Administration to enact needed federal investments in domestic semiconductor manufacturing and research, as called for in the CHIPS for America Act, so more of the chips our country needs are produced on U.S. shores.”

It Takes a Village

Calling the global chip shortage “America’s Wakeup Call,” Hudson Institute Senior Fellow Arthur Herman says the dearth is holding back economies from recovering from the impacts of the pandemic.

“Chips are the oxygen of our digitally-driven world, yet many of the top semiconductor companies are now ‘fabless,’ which means that they only design the chips and the technology in them,” he writes in Forbes. “Two of the largest [foundries], TSMC in Taiwan and Samsung in South Korea, are making chips as fast as they can but they have been overwhelmed by the sudden soaring of demand.”

With four new chip factories slated for construction in the U.S., Herman says such initiatives are expensive (up to $20 billion per fab) and a long-term (up to five years) process. “It’s going to require political will and innovative planning, in addition to monetary investment,” he predicts, “to turn America’s situation around.”

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