Most people need toilet paper and computer chips every day,
and yet we rarely think about either of them.
That changed during the coronavirus pandemic when first
bathroom rolls and then chips became scarce. Computer chips aren’t so
disposable, but they are equally essential as electronic brains for products
like smartphones, cars, airplanes and most modern appliances. Chip shortages
have stalled new car manufacturing, made rental cars harder to find and
complicated business even for the dog washing industry.
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I spoke to Don Clark, who has written about computer chips
for years, about the importance of chips, why the US government is obsessed
with making more of them in America, and how a new chip mania is a revenge for
the nerds.
Q: What are computer chips used for?
A: Computer chips are
like tiny brains or memory receptacles. This makes them important for pretty
much everything in modern life. The obvious places are electronics like
computers, smartphones, video game consoles and voice-activated speakers.
But chips are also in products that are used to track milk
production of dairy cows and to make sure produce in trucks stays at an
appropriate temperature. A modern car can have several thousand chips,
including for the ignition, brakes and entertainment system. This year, the
production of $50,000 cars is being held up because of a lack of $1 computer
chips.
Q: Right, how did chips lead to a freeze in car
manufacturing?
A: Last year, when the
pandemic first hit, automakers estimated that many people wouldn’t want to buy
cars, and they cut orders for computer chips. When it turned out that car sales
increased, the companies tried to order more chips on the fly. But the chip
manufacturers had already moved on. They had shifted production to fill orders
for products like phones and game consoles.
Q: Are chip shortages unusual?
A: No, but shortages are
usually confined to one particular type of chip. What’s unusual about this year
is there’s not enough of many different kinds of computer chips, because of a
combination of some disruptions related to the pandemic and overwhelming demand
for more and more chips for everything.
To give just one example, each new smartphone with a 5G
internet connection has 100 little components in it called filters that connect
to all the different frequencies. That’s 100 computer chips for just a single
function.
Q: When will the shortages improve?
A: Companies are trying
to crank out more chips, but it’s difficult to react quickly. Chip companies
are also trying to stop customers, including car companies, from ordering
double the number of chips they really need just to be sure they get some. But
shortages will probably last until 2022 and could get worse before they get
better. That’s partly because many scarce chips come from older factories that
are hard to upgrade.
Q: Congress and
President Joe Biden seem very likely to back
billions of taxpayer dollars to make more computer chips in the
United States.
Why?
A: Shortages of products
like personal protective equipment made in China have gotten the public and
policymakers to discuss the downsides of having essential products made outside
the United States.
Many advanced computer
chips are made in Taiwan, and that
makes the Pentagon in particular nervous about not being able to get essential
computer chips if relations between Taiwan and China get worse. And the United States - Wikipedia government wants to be more self-reliant in the case of emergencies, like
earthquakes, in Taiwan.
Another issue is global competitiveness. Countries including
Ireland, Taiwan and Israel give boatloads of government incentives to factories
that produce chips. Intel, the big American computer chip company, doesn’t
really need U.S. taxpayers’ money. But it wants to ensure that the company
isn’t doing vastly worse by making its chips in the United States.
Q: Forgive me, but the computer chip industry is very nerdy.
How do people in the industry feel about being such a hot topic?
A: Yes, this has been
the boring old industry of tech, like steel making. That’s changing, partly
because of the attention on chip shortages but that’s not the only reason.
I wrote an article Friday about the amount of investments in
new computer chip companies — about eight times the dollars invested in 2016.
Young people who might have formed software startups a few years ago are now
choosing to start chip companies. There is a lot of interest and excitement in
chips now, and the people in the industry feel that it’s nice to be seen as
really important.
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