Jobs told Apple executives that no matter how the internals of smartphones and computers change, consumers only care about products and experiences. Jobs called it "magic."
And the presentation of "magic" largely depends on the chip. That's why Apple develops its own processors. When the first-generation iPad was launched, Apple was equipped with its own processors. Until 2020, when Apple's processors replace Intel's entire line, and the M1 chip is installed into the Mac, its processor business will not be truly completed.
For big tech companies, core making seems to be a fad. If you don’t make cores today, you are embarrassed to call yourself a technology company. So, what is the logic of enterprise core making? Why is there a shortage of chips in the near future? What challenges does the chip industry face? Let us find out.
Large enterprises make cores
Over the past few years, Apple's processor performance has grown by leaps and bounds, making rivals nervous. Apple followed that up with two versions of the M1 processor, and more recently Apple put two M1 chips into high-priced workstations to help creators edit videos.
In addition to Apple, many large technology companies are developing their own processors, such as Google AI processor (TPU), Amazon AWS Graviton data center processor, a series of processors from Huawei, etc. The industry is changing quietly, Google TPU has become the king of ASIC, and Tesla AI chip can make driverless driving more excellent.
The chip industry was originally very complicated, but now the supply chain is much simpler, and it is easier for companies to enter. For example, Apple, which introduced the ARM architecture, optimized it and handed it over to TSMC for production. If big companies can integrate chips with other advanced technologies, they can gain a competitive advantage and undermine the competitiveness of traditional chip makers.
There are many forms of integration. For example, the AWS chip is designed by the Annapurna Design Lab and can be produced immediately after it is designed. Apple apps run faster on its own processors because the chips and software are better tuned.
Google researchers believe that since the benefits of shrinking the chip size are smaller, if you want to make a big improvement in performance, it is best to let the hardware, software, and neural network achieve co-design, that is, a company that vertically integrates everything.
Then look at Nvidia, which relies on GPUs to become the world's most valuable chip company. Now GPUs are not only used in video games, but also can process machine learning algorithms. Apple compares its latest M1 chip to Nvidia's top-of-the-line GPU and appears quite confident. AWS has also claimed that its second-generation Trainium chips are better than Nvidia chips.
From an enterprise perspective, big tech companies are developing their own processors. From an industry point of view, the core shortage is still serious. From a national perspective, chips have become an important battlefield for great power competition.
The core shortage continues
The consequences of the lack of cores are serious. Ford has cut production of cars due to lack of cores, and Apple will lose $6 billion in revenue due to lack of cores in the fourth quarter of 2021. Now many products are delayed for months or even years due to lack of cores.
Why is this? Because the demand for chips has increased greatly in the past few years, but the growth of production capacity has been very slow, and it is not easy to change the contradiction between supply and demand in a short period of time.
The EU has passed legislation to boost chip manufacturing capacity. The United States has similar moves, and it appears to be more nervous and aggressive than the European Union.
It is also important to note that although there is a lack of chips now, Forrester pointed out in the report that what is missing is mainly "node mature" chips, that is, older chips. All the cars need are older chips because they are more reliable and less expensive.
At present, 80% of the world's chips are produced in Asia. It may cost 10 billion US dollars to build a chip factory. It will take 2 years to build and several months to be certified. Is it over? No, it will take 3 months or more of trial production after that. Therefore, it is not easy to solve the production capacity problem in a short time.
The impact of the Russian-Ukrainian conflict
Just when the chips were out of stock, the conflict between Russia and Ukraine broke out.
Russia and Ukraine are major exporters of neon gas and the metal palladium, which are needed to make chips. Neon gas is required for laser printing onto silicon, and the metal palladium is required for the manufacturing stage.
About a quarter to half of the world's semiconductor-grade neon gas comes from Russia and Ukraine, and about one-third of the metal palladium comes from Russia.
TSMC claims that they already have an alternative supplier of neon gas, and there is no problem with the supply. Infineon, which mainly supplies automotive chips, said production would not be affected, suppliers had alternative options, and the company had increased stocks of affected raw materials and inert gases.
Of course, this is just the company's statement. The market will verify whether it is right or wrong. Risks still exist, and companies should not be careless. LinxConsulting analysts believe that chip factories did stock up on neon gas before the conflict, but these inventories can only last for six months; after the stockpile runs out, the price of neon will climb, as it did when the Crimea conflict broke out in 2014 ; The spot price will skyrocket from 25 cents a liter to $5 a liter.
Bernstein analyst Stacy Rasgon believes that even if the price of neon rises 10 times, the cost impact on the entire semiconductor industry will not be too great. According to estimates, the size of the semiconductor-grade neon gas market is about 100 million US dollars per year, while the size of the global chip market is 500 billion US dollars.
Conclusion
Unconsciously, the world may have entered a "world of great competition", and chips have become a hot spot of competition. In 2021, Chinese chip companies raised US$10.8 billion, an increase of 40.7% over 2020, setting a record. This year, the total financing of global chip companies was US$19.4 billion, and China accounted for more than half. It may not even be a cutting-edge chip that decides the chip battle, but a mature chip at 28nm or even older.