US Markets
Wednesday, September 25th, 2024 6:05 pm EDT
Key Points
- A surge in demand for AI-focused semiconductors, particularly GPUs from Nvidia, and AI-enabled devices like smartphones and laptops, could lead to a global chip shortage, according to Bain & Co.
- The semiconductor supply chain is highly complex, and even a 20% increase in demand could upset the balance, causing chokepoints and shortages, especially with the rise of AI across various industries and products.
- Geopolitical tensions, trade restrictions, and efforts by countries like the U.S. to reduce dependence on China for semiconductors further complicate the supply chain, increasing the risk of a chip shortage.
A new report from Bain & Co. warns that surging demand for AI-focused semiconductors and AI-enabled devices could potentially trigger the next global chip shortage. This follows the previous semiconductor shortage during the COVID-19 pandemic, which was driven by supply chain disruptions and an increase in consumer electronics demand as people worked from home. The current boom in AI technologies, particularly the graphics processing units (GPUs) from companies like Nvidia, is critical for training large AI models like OpenAI’s ChatGPT.
These GPUs, used primarily in data centers, are essential for running complex AI applications, and demand has skyrocketed as more industries adopt AI solutions. Meanwhile, companies such as Qualcomm are developing AI-capable chips for smartphones and personal computers, allowing these devices to perform AI tasks locally, without relying on cloud connectivity. Tech giants like Samsung and Microsoft have already released AI-enabled gadgets, though it remains uncertain how much demand these devices will generate, given consumers’ cautious approach so far.
Bain’s report highlights that the semiconductor supply chain is fragile, and a demand increase of 20% or more could disrupt the balance, leading to shortages. This risk is heightened by the convergence of rising demand for both GPUs and AI-enabled consumer electronics. The supply chain is spread across various companies, with manufacturers like Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics producing chips designed by firms like Nvidia. TSMC relies on tools from around the world, including the Netherlands, making the supply chain vulnerable to disruptions.
Geopolitical tensions also add to the uncertainty. U.S. export restrictions and sanctions aimed at limiting China’s access to advanced chips, as well as efforts to bolster domestic semiconductor production in the U.S., could further complicate the situation. Delays in factory construction, material shortages, and other unpredictable factors could create additional pressure points within the semiconductor supply chain, potentially leading to a widespread chip shortage.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/09/25/surging-ai-demand-could-cause-the-worlds-next-chip-shortage-report.html
