The New Chip Wars and Why It Matters to Your Enterprise
By Jim Lundy
Nearly every enterprise has been impacted by the shortage of microprocessors, also referred to as chips. However, the issues actually go further than that as nearly every industry is becoming digital and that means the demand for microprocessors will reach unprecedented levels over the next few years. Understanding this new era of chip wars and what it means to your enterprise is critical for future product families and revenue streams.
The Automotive Market and Chip Supply and Demand
One of the major stories of 2021 was the lack of microprocessors for the automotive industry. Many major manufacturers use just-in-time supply chain methodologies, which ended up burning them due to limited supply during COVID-19. Q4 did see recovery and manufacturers like Ford were able to ship record numbers of vehicles, including the F150. However, with the EV generation of vehicles now here, cars are becoming digital and the small number of chipsets that were needed for gas powered cars is dwarfed by the ones needed for EVs.
The Global War for Chip Foundries
The issue is actually a global issue in that a large percentage of manufacturing for semiconductors was relegated to one country, Taiwan. The US government and other governments have recognized that and have recently seen a commitment to invest in US semiconductor manufacturing by both Intel and Taiwan manufacturer TSMC.
The Battle for Taiwan is Strategic
One of the things that is not being talked about is the desire of China to take over Taiwan, and with it, control the world supply of semiconductors. This could lead to economic warfare at an unprecedented level if the supply chain is interrupted. This is why there is such a race to build new manufacturing capacity for semiconductors outside of Taiwan and outside of Asia.
The Issue of Chips and Cloud and AI
For example, if you decide to run your application and use tensor units designed and produced by Amazon, those applications that are running with those GPUs are not portable to other cloud platforms. This scenario would make it harder for an enterprise to port leave Amazon. However, if the same enterprise decides to use NVIDIA GPU’s in Amazon, then they are able to port their application and run on the same NVIDIA GPU’s in either Google or Microsoft Azure clouds.
The Issue of Supply Chain Viability of Chip sets, Servers, and Motherboards
There is also a supply chain quality issue. It has become clear that certain types of hardware manufactured in certain locations, such as China, in some cases have become infected with malware. So, enterprises now must do supply chain due diligence on the hardware their applications will run on whether it is from a cloud provider or in their own data centers. There are examples of government entities having to shut down and rip out certain classes of servers because the hardware was infected and other governments were spying on their data.
What Is Your Enterprise Need for Semiconductors
There is a new race for semiconductors slash chips and it is important to understand that type of demand your enterprise will need and do forward-looking planning to determine the suppliers you will have for your digital equipment and infrastructure.
Every market is becoming a digital market and every market will need multiple types of chips, including edge compute for AI. Enterprises need to understand their current and future needs and carefully vet suppliers, realizing that not all suppliers can be trusted to deliver clean processors and motherboards.