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.”