1 Dollar Chip With Fatal Effect: The Global Economy Is Slow Down

Description of 1 Dollar Chip With Fatal Effect: The Global Economy Is Slow Down

The world doesn't have enough microchips - and that's why billions are being lost. A chip that costs less than a pack of chewing gum causes particular problems in the bottleneck. Egg cartons may not have to be "smart", but that hasn't stopped the developers of some "smart" products from designing such devices. The result of this trend: Everything - really almost everything - needs a microchip these days. In addition to some questionable gadgets, computers, smartphones and cars are of course increasingly dependent on semiconductors. However, the suppliers are currently unable to cope with this demand from everyone. All industries are affected by the so-called "chip crunch". Even manufacturers like Apple, NVIDIA or VW are not safe. According to Bloomberg , analysts should estimate that in the automotive industry alone, 60 billion dollars in sales will be lost this year due to the bottleneck. In the lockdown, production was shut down - but now the demand is even greater The whole thing is due to the first lockdown: Almost a year ago, customers in the semiconductor industry, especially car manufacturers, shut down their production. Other industry giants such as Taiwan Semiconductor (TSMC) did the same or rescheduled. In the second half of the year, however, demand exploded as industries picked up again. Consumers also contributed, as consumer electronics were increasingly bought during the lockdown. VW's problem. & Co: They are lower down in the ranking. Although a single vehicle can nowadays sometimes require hundreds of semiconductors, the business with chips for smartphones or computers is more lucrative for corporations like TSMC. Top-of-the-line models of this chip can reach prices in excess of $ 1,000. A $ 1 chip becomes the bottleneck's biggest problem Because of this, there is now an imbalance between supply and demand, a challenge for the industry. The chip, which is currently the biggest problem, doesn't cost anywhere near as much as the flagship processors. On the contrary, it is even cheaper than a pack of chewing gum. The work of the so-called display driver chips is downright trivial, especially in comparison with high-end chips such as Apple's A14 Bionic, which can perform eleven trillion arithmetic operations per second. They are simply an interface between the central processors and screens - and accordingly only cost one US dollar each. However, they are used everywhere, in smartphones, monitors, televisions, in smart refrigerators, and in the center console of a car. "If you have everything, just not the display driver, then you still can't manufacture your product," an analyst at Bank Sanford Bernstein told Bloomberg.Production capacities have already increased to over 100 percent - more is not possible"I've never seen anything like this in the 20 years since my company was founded," said Jordan Wu. Wu is co-founder and head of the semiconductor company Himax, one of the leading developers of such display chips. Even his company can hardly save itself from orders - but Wu cannot simply produce more chips. Because like many other chip companies, Himax is "fabless". The company does not own any factories itself, it just designs the microprocessors. Production is in turn carried out by "foundries" - chip foundries "such as TSMC or United Microelectronics. They have already increased their capacities to over 100 percent - and more is simply not possible. These "foundries" cannot simply set up new production lines for the cheap chips that are in demand. Its 16 nanometer structure is several generations behind the current gold standard of five nanometers for the individual lines within a circuit. For comparison: a human hair is 75,000 nanometers in diameter. For companies, it would be economically nonsensical to continue building production lines with outdated standards - in the figurative sense, this is comparable to Volkswagen producing the Golf III again. Another problem is that the suppliers themselves can no longer keep up with the suppliers, the manufacturers of wafers. The chips are etched onto these silicon wafers and broken out. The smaller the chip, the more profitable this process is for the manufacturer, since more chips ("die" or "dice") can be obtained with the same wafer size. For this reason, too, it would be a financial step backwards to build increasingly larger chips again, not to mention the costs of setting up the production lines. Force majeure" puts an additional strain on the supply chain In addition, there are accidents that bring the stressed chip supply chain to the breaking point - such as the interim blockade of the Texas or the fire in a factory of the Japanese supplier Renesas in mid-March. According to the specialist in car chips, it could take three to four months before capacities there can be fully utilized again. The industry giant TMSC is also currently struggling with unfortunate circumstances. Due to a drought in Taiwan, the foundry is now threatened with bottlenecks in its water supply. A typical semiconductor factory requires up to 15 million liters of purified water per day. So far, TSMC is said to have not been adversely affected by the drought - but Taiwan's economics minister has already turned the tap on other industries, Bloomberg reported . The German supplier Continental is already taking measures to protect itself against possible follow-up costs of the "chip crunch". Compared to the " WirtschaftsWoche ", the DAX company explained that it was referring to the "force majeure clause" in view of a "series of unforeseen, significant events". The group wants to ward off any claims for damages by its customers due to missing components. Suez Canal, the snow storm in The only bright spot: business for the next few years is certainHowever, there is also a ray of hope that the "chip crunch" has: The certainty that companies such as Himax, TSMC or ASML - specialists in chip lithography - will have business for years to come. Almost all the big names in the industry recently announced that they would invest enormous sums in new factories. For example, TSMC plans to invest $ 100 billion over the next three years. Samsung is also planning to put a total of 116 billion dollars into its own production in the next decade. Even Intel, which has long been scolded for its stubborn adherence to its own production, are now turning back: Instead of going "fabless" like Nvidia or AMD, the company wants to build two new factories in Arizona for 20 billion dollars. In comparison, Germany's flagship semiconductor company Infineon is worth a total of only $ 55 billion. Chip production is capital-intensive - the smaller the nanometer, the more billions it takes for a single "fab". For 2021 alone, TSMC plans capital expenditures of $ 28 billion, more than half of its sales in 2020. How exactly the group intends to finance this massive expansion in the next three years is still unclear. In any case, TSMC has canceled the usual price reductions that "foundries" grant as soon as the production of new chips runs smoothly, as the magazine " Nikkei " wrote.Ruined buildings, missing managers, cheated construction companies and investors instead of major projects in ChinaFrom an investor's perspective, it is an advantage that the semiconductor industry requires so much capital. The entry barriers for other competitors are set high. There are warning examples of this above all in chip-hungry China. Local industry there is long overdue. But in the past two years alone, six billion dollar semiconductor projects in China have failed, as reported by the US broadcaster NPR . One of them is Wuhan Hongxin. In the face of overwhelming US sanctions, the company promised a path to self-sufficient manufacturing. The original plan was to raise $ 20 billion with the goal of producing 60,000 state-of-the-art chips a year. But only a ruined building remained of this promise in Wuhan, disappeared managers, cheated construction companies and investors, according to NPR. For the market leaders, this in turn means that their shares are largely safe, a factor that investors seem to be focusing on again. After the latest tech sell-off, TSMC shares again moved well above the 100 euro mark. Intel's paper is also stalking the 52-week high at 58.52 euros. ASML Holding is trading at a record level. The Himax share is also not far from its all-time high - and that thanks to a 1-dollar chip, of which there are simply too few.