Semiconductor Chip Shortage – Lab 071

Have you been seeing all these shortages. It feels like there's a shortage of everything.

Yes, there's a shortage on baby formula, there's a shortage on tampons. I saw something about olive oil shortage olive oil, which is creeping very close to there be.

A shortage of my patients.

I am very tired of all of these shortages because as soon as something there's not enough of something, that means people are going to start panicking.

We saw that in the.

Pandemic when there was a shortage of toilet paper and hand sanitizer and chlorox wipes. And one thing that has come across our radar but isn't really that new, is the semiconductor chip shortage. Yes, and I feel like Christopher Mims gave us a little bit of a heads up, like, hey, some of these things are happening, but it's getting out of control.

Now.

I want to know why we're still dealing with this shortage and what's next? What are we going to do about it? What's the plant? I'm Tti and I'm Zakiath and from Spotify.

This is Dope Labs.

Welcome to Dope Labs, a weekly podcast that mixes hardcore science pop culture and a healthy dost of friendship. So, like we just said, there's been a lot of shortages, one being the chip shortage.

But the chip shortage is a little bit more complicated, changing a lot.

I guess whether or.

Not there is a shortage. It depends on what you type into Google.

It seems like in some countries they got a lot of chips, but in the US we might not have enough. At some points, you know there's not enough chips, and then at another point you got too much dip on your chip.

This week, we're talking all about computer chips, or specifically semiconductor chips. These tiny pieces of equipment that are in every computing device out there. They're vital to how our world runs, and right now there's a major shortage. We wanted to know more about what's caused a chip shortage, how it's affecting our lives, and what people are doing about it.

Let's get into the recitation. So what do we know?

Chips, chips, chips everywhere. They're in everything.

Literally, they're in everything. Any device that operates on its own without you having a cranket, it has a semiconductor chip inside of it. And so when you stop and think about that. Almost everything except like a table, and some of these tables have chips in them too.

My desk was going up and down. It probably has a chip.

It does have a chip.

They're in our refrigerators, they're in our cars, they're in military equipment.

Almost everything you touch has a chip in it.

We know that there's a shortage and it's having an effect on the economy.

So what do we want to know? Where are we in the shortage?

Because I thought we have reached the heights of the shortage in twenty twenty Right then it's twenty twenty one. We went over what I thought the high was, and so here we are now the shortiest of shortages. Okay, I thought shortage meant we got a little bit. Y'all still saying shortage? How we stealing out a little bit? What's happening?

And what is anybody doing about it? What are manufacturers doing about it? What kind of policy is around hopefully relieving some of the pressures here? What's going on?

I think something that would be important for people to understand is the importance of semiconductor chips, So how they work, why they're so important, and why we should be worried about it.

Let's jump into the dissection.

Our guest for today's lab is Al Thompson.

I'm Al Thompson. I'm the vice president of US and Canadian Government Affairs at Intel.

Intel is one of the major players in the semiconductor chip industry, and because these chips are in so many things that we rely on, that industry is shaping our lives.

Ow broke down what a chip is.

It's a complex device that forms the brains of anything that involves computing.

That includes phones, medical devices, cars, more and more modern appliances have chips, and most of those chips are made in Taiwan, South Korea and China.

It's one of the most complex products manufacturing in the world. They're small as a fingernail. They're flat, but on the surface you generally have three dimensional structures that can include up the thirty layers of different circuitry on them.

So what's a chip made of?

The basis for every chip is that it's built on a piece of silicon, and then on each piece of silicon there are these things called transistors, and transistors are what the device uses to function. It has switches and amplifiers and things like that different chips have different responsibilities, so not all chips are created equal. Some are used for storing data, so if you think about your those chips store data so you can access it whenever you

You know, back in the day, chips weren't what we know chips to.

Be now, where you can have thin laptops, AirPods that don't have a cord, and all these different things. Fifty years ago they would take up entire rooms, Like when you're talking about the first computer, it took up an entire room, and even things like oh, you know how we say, oh, if.

There's a bug in my computer. Back then, it was literal bugs.

That's where we get the terminology from the first computer. Rug was a moth inside of this side of this computer that took up a whole room. Everything is so thin and so small because there have been so many advances in chip technology.

The microprocessor was first created well over fifty years ago. But you know, now the technology has evolved in terms of the manufacturing process where you can stack different components on top of each other. Even know the surface of the chip itself is still pretty that so.

There's all of these pathways for electricity to move around the chip and perform different functions. And also the most sophisticated chips have hundreds of millions or billions of these circuitries on them and that are interconnected by fine wires and copper.

So on that small little piece of equipment you have the ability to do everything from either store information and those are called memory chips, or actually compute and make decisions. We call those logic chips.

So chips have been getting smaller and smaller, but their capabilities are increasing. To understand how that's happened, we need to understand how the chip is kind of evolved.

The evolution of the semiconductor chip is defined by a prediction that was actually made in nineteen sixty five by one of the co founders of Intel, Gordon Moore, and the prediction is called Moore's laws. He says that the number of transistors on a semiconductor chip will double every two years. If you have a semiconductor chip and there's ten transistors on it, two years from then, there'll be twenty, and two years from then there'll be forty two years from then, it'll be eighty and so on and.

So forth, and that is continued to this point. What More's Law has done is has allowed chips to basically evolve and be able to go from what used to be very large computer mainframes to your iPhone. And it's an continual process that allows us to try to get more transistors on a chip, that makes a chip more energy efficient yet powerful from a computing standpoint, but making the size smaller all at the same time.

I think the common misconception when people here computing is to think only about computers. But like you said earlier, chips are in everything. Your refrigerator, your car, for example, brand new cars now are about four percent chip. That's a lot. It's not just older as one chip. If you had car problems, you know about the chips, okay, and it's only expected to continue to increase.

There's really no aspect of our lives that's becoming less digital. If you think about it, everything is becoming more and more digitized. Like as we see advancement in any technology. Now, I can't even think of something that doesn't have a chip.

Truly.

Your glass is the only thing I seen without a chip, but those about to start clipping over Google.

Glass and everything like that. Mm hmm, I'm ready for that. My friend want to be a I want to be a robot. Put the chips in me, put it in me. That's what I want.

Is that the goal for everything.

To be chip based?

I feel like that's possible and that is what we're creeping towards.

But what is the ultimate goal?

So we asked l and he said, while COVID accelerated digitization in a lot of ways, it's great because it makes a lot of things more accessible for a lot more people.

Technology allows people to have flexibility they didn't have twenty years ago. I grew up in the eighties. There was no cell phone. We had a landline. Did I have a computer system, Yeah, but it was huge. There was no such thing as putting an infotainment system in your automobile. The infotainment system was the radio based on the intenna

Yeah, these things are a really huge part of our lives, personally at work, just moving around in public spaces. But how has the shortage affected those areas of our lives?

Well, because so much of our life has become digitized, the chip shortage has kind of had waves of effects. So you think back TT when people were saying they couldn't get cars, or was taking U so long to get laptops early in the pandemic. Yeah, chip shortage, But now it just feels like there's a shortage of everything which could be related to the chip shortage.

So we've touched on some of the factors in the chip shortage, but what we really need to understand is how this even started.

All said is all about supply and demand.

So I would say, at the big picture, high increased demand capacity that had increased, and then other components of the supply chain had their own set of unique challenges with made it harder to produce those components. All of those things happening at the same time is what led to the chip shortage that we face today.

Just like we've highlighted in a lot of other labs, when COVID hit, it changed everything, and that is true for this as well. A lot of things moved to digital platforms in a really short.

Amount of time. Al said.

The supply chain shortages meant that there was about five percent more demand then manufacturers could supply, but the pandemic took that and pushed it to twenty percent.

That is four times larger.

People move so many things online, work, meeting, school, and everybody needs to have a device, and then you need better routeries, and then you need more and more and more accessories, all of these things that were just driving demand through the roof, but manufacturers of chips didn't have the opportunity to increase output just as fast. So there's this incredible imbalance. And then on top of that, in different places, as the pandemic is ripping through the population,

It takes three years to build a semiconductor fab three years.

A semiconductor fab is a semiconductor fabrication plant, so it is a special facility with the specific purpose of making semiconductor chips.

So everything that we've announced within the last year or two won't not be online until twenty twenty four to twenty twenty five because the scale and the size of the facilities are just so large that they take a while to build and equip.

I understand to specialize, but I also feel like people have thrown up apartment buildings and things like this. Is that facility taking so long? Those things are going up fast. It's like, Oh, they're breaking ground. Oh they're accepting applications for lease that.

Pool and everything. How did you get that water up there?

Your first step is to build the facility itself, and you're talking about something the size of four or more football fields, so you're building out that actual physical structure. The next component comes. You have to equip it, so all that floor space generally has very sophisticated and large pieces of equipment that either do things from using white to essentially print the circuitry pattern on a wafer. That

Of the facility, and beyond just the physical facility. You need people in the facilities to actually do the work putting these chips together.

And then while you're also doing that, you're hiring the workforce to be able to come in and manage it. That workforce includes significant amount of engineering talent at the bachelor, master's and PhD.

Level as well, and companies are trying to find different ways to find workers because you need a lot of different skill sets to make more chips.

We have to have construction workers, and those construction workers have to be specialized welders and electricians to actually build the facilities. Then if we get there, we have to be able to staff them. Some of those workers could be ensuring that engineering talent in the United States, most of which come from foreign countries. If those folks want to work in the US as engineers, at our companies. We should hopefully have an immigration system that allows them to do that.

That's such a great point. You need people. I think a lot of folks when they think about semiconductor fabrication. If they're thinking about it, they're thinking about machines, make more machines. But you need talented individuals to do that work.

We're going to take a quick break, but after the break, we're going to get into the policy behind chip manufacturing. We're back and next week we're talking all about the digital divide with a Cold Turner lead. We're gonna talk all about who has access to Internet, who doesn't, and how the gap disproportionately affects low income people and.

People of color.

We've been talking with Al Thompson, the vice president of US and Canadian Government Affairs at Intel. So far we've learned what a chip is, what it's made of, and how basically everything in our lives is becoming more and more digitized, which means more chips. Now, we want to talk about the cost difference between manufacturing in the US and in countries like China, Taiwan, South Korea, and Japan, where we know they're doing a lot of chip fabrication.

So thirty years ago, close to eighty percent of the world semiconductors or manufactured in the United States and Europe, and twenty percent or so were manufactured in Asia. It is now completely reversed. Eighty percent of the world semiconductors are manufactured in Asia, divided between Japan, South Korea, Taiwan,

So what China did is they made it more appealing, and the way that they did that was by creating these tax and tariff exemptions to sustain and develop its chip industry. Tariffs are for the important exports of goods, and so if there are exemptions that means that you don't got to pay so much to or export goods, that is very appealing.

You're basically subsidizing the cost to manufacture something. If it's cheaper for me to make my chips in China, I'm making the chips in China. And so it's advantageous for China, right because you may say, well, why would they make such a deal. Not only are the chips being made in China in their country, that also reduces China's reliance on chips from other countries, so they don't have to look to Taiwan or you know, any other country to do this. We've seen this recently in India, Japan, and

At the end of the day, there's a thirty percent cost difference between building and operating factories in Asia compared to the United States.

Thirty percent feels big to me, So what are we going to do to close that gap. Congress actually passed the Chips Act that's part of the National Defense Authorization Act in twenty twenty one.

The bill has around fifty two point five billion dollars in funding for the semiconductor industry.

But passing isn't the end all, be all. They haven't formally budgeted out any of that funding. In order to actually put the dollars behind the Act, we need to fund the Bipartisan Innovation Act. Alice saying companies want Congress to pass that bill so that they can get the money the fifty two point five billion that people said when we would get in twenty twenty one with the Chips Act.

What the Bipartisan Innovation Act would do is eliminate that cost delta a thirty percent. If you take away that cost delta, it's much easier to drive investment here. That has two benefits, not in terms of just job creation, but it improves supply chain resiliency because over the last half a century, company rewarded for the efficiency of their supply chain, not necessarily the resiliency of their supply chain.

All said, the way for companies to shift to a more resilient supply chain is to go from a just in time manufacturing model, which is when companies create items as needed to adjust in case model, where companies do the opposite of that, where they make enough product in advance and have it in excess.

It feels like we're hitting on this distinction between efficiency and resiliency, and so when it comes to chip manufacturing, what does it actually mean.

A big part of this is having a more diverse supply chain so production doesn't stop if one part of that production process is compromised.

And that's part of what this push for chip factories in the United States is about. But funding for those factories installed in Congress in June. Global Wafers a Taiwanese semiconductor maker, the third largest one in the world, said they would build a five billion dollar factory in the United States, but only if the government helps pay for it. They're going to put a twelve billion dollar plant in Phoenix to produce the most advanced chips, but the CEO

Instead of having a supply chain where eighty percent of it is concentrated in one part of the world, and of that half that eighty percent is concentrated in two countries, meaning anything that would go wrong in that part of the world could lock down the supply chain, a resilient supply chain means weight. We have robust manufacturing and passing in Europe. We have robust manufacturing passed in the US,

This means more factories to produce these chips and meet a demand that has skyrocketed.

So demand for chips is going to increase every year by five percent between now and the end of this decade. To meet that demand, meeting meeting people needing products that include semiconductors, capacity or the number of facilities has to expand globally by fifty seven percent.

Al says a success of a semiconductor company is driven by the ability to invest more in Moore's law, that law that says there should be more transistors on a chip.

Every two years, it should double.

So that chips can evolve and become more leading edge. These go into our iPads, our computers, our cell phones.

I'll send. Any efforts to address supply chain shortages in the future need to be a balance of chips that are already in production, so kind of mature chips and new cutting edge chips.

The challenge and the reason why it's so hard is the chips that you need tend to be the older chips, and those are harder to maintain over time. Because More's law requires you to kind of continue to push forward toward more capable chip and all of the resources not necessarily in physical material but tools and manufacturing processes. You don't have as much of that as you used to ten to fifteen years ago.

So it's not necessarily the materials that are the issue in the chip shortage, it's the manufacturing technology.

We need more of the older chips.

But in order to stay on the leading edge with our technology, a lot of companies have invested more in modern chips.

So how do you address these pitfalls? These are in direct opposition? So how does the chip industry deal with this? And then I'm curious, like, if all of this is going on, and we see how it's working in other countries, why didn't our government anticipate this?

TV you saw what other folks were doing. The government knows what everybody else is doing. Everybody knows what everybody's doing. Everybody's looking at everybody's paper. We should have been able to anticipate this and put some stuff in place.

And because we didn't, now we're playing ketchup Al said that COVID changed the way the United States now approaches chips and manufacturing. He said, there has to be more focused on research and development or R and D. Then there is the investment in starting materials. Right. We touched on that with doctor Kate Butner in our previous lab

All said, Intel spends about fifty team billion dollars a year on research and development, and that's one of the reasons why only a few companies can do that is because you have to invest so many resources to conduct that research.

There's no getting around that. Moore's Law is incredible. Moore's Law is also expensive. One of the things that's been clear, and this is why the Innovation Act is so important, is federal pre competitive research has kind of stayed flat, and we need to invest in these because the semiconductor shortage.

Investing in the chip industry is critical for the United States to remain competitive in technology, and because our lives are increasingly depending on technology, that also means meeting the higher need for chips through manufacturing them here. I think all the points that Al brought up are so important. I think one that I really want to highlight is jobs.

Having these semiconductor fabrication plants in the United States and doing the production here rather than getting it from other countries not only helps us economically from a standpoint of oh, folks will need to purchase from us, but it also creates jobs for lots of Americans and immigrant people who need work. So not only will we be saying on the leading edge of technology, but also invigorating our economy from a workforce standpoint.

Yeah, and it feels like it's this intersection of all these things we've talked about, you know, in a previous episode where we talked about metals, one of the things that we talked about is the geospatial distribution of different source materials and different elements. And part of this chips shortage what we're seeing is due to the reliance of the semiconductor manufacturers on neon. Neon is primarily coming out of Ukraine, you know, we have the war between Russia

I feel like a lot of people have seen that happen in their counties and their states, where they say, oh, we're gonna build this bridge, or we're gonna build these facilities, and you know, the money doesn't come through, and they say, oh, in five more years and ten more years, and then ten years turns into twenty years, turns into their years, and it almost never gets done. And what that does

But a lot of this also has to do with the trajectory of the economy. There feels like there's a looming recession, so maybe people aren't buying as much, which decreases demand. But also note that I said the surface plus was in South Korea. That gets back to what we were saying earlier in this episode about incentivizing production here in the United States.

Right and when we think about the production and manufacturing, the US is playing catchup right now.

That's basically what.

Al told us, And it's going to take a long time for the US to catch up to some of these other Asia based companies, so they'll likely dominate manufacturing for the foreseeable future. And even if US manufacturing increases, one natural disaster global pandemic can, as we've seen, can disrupt the whole thing.

All right, it's time for one thing. What's your one thing this week's?

Ee?

My one thing I already mentioned very briefly in the conclusion, but it is the on Tech newsletter from the New York Times with Shira Oviday. I like getting this newsletter and just getting an overview of what's going on. So the latest issue told me about the chip shortage and

How that sounds perfect for my friend?

I want to know it all. What's your one thing? Tt?

My one thing this week is something that came across my Instagram feed and it was research out of Northwestern So they said May twenty fifth, they were able to develop the smallest ever remote controlled robot.

And it looks like a little tiny crab.

It's about a half a millimeter wide, which half a millimeter is about the size of the tip of a pen. And so it's really really cool to see that they were able to make something so tiny. And so when you think of applications for something like this, because you know, the first thing is what do we need with that small robot? But think about some tasks that may need to be done in very very tight spaces. If you can get this robot to do some of the things

Wow, that's it for LAP seventy one. What did you think? Did you learn something new about the chip shortage? Do you think we're gonna get the funding for that for those factories to be built? I have questions. Call us at two zero two five six seven seven zero two eight and tell us what you thought. Also, you can call us and give us an idea for a lab

Plus you can sign up for our newsletter check it out at Dope Labs podcast dot com. Special thanks to today's guest expert Al Thompson. You can find him on Twitter at at nine eight three, and you can find us on Twitter and Instagram at Dope Labs Podcast.

TT's on Twitter and Instagram at dr Underscore t.

Sho, and you can find Zakiya at z said So. Dope Labs is a Spotify original production from Mega Own Media Group.

Our producers are Jenny Radley, Mask and Lydia Smith of Wave Runners Studios.

Editing and scoring by Rob Smerciak and Griffin Jennings, Mixing by Hannes Brown.

Original music composed and produced.

By Taka Yasuzawa and Alex Suduer from Spotify Creative producer Miguel Contreras. Special thanks to Shirley Ramos jess Bison, yasmin A Fifi, Kamu, Lolia, Till crack Key and Brian Marquis executive producers from Mega Own Media Group, all Right US T T Show, Dia and Zakiah Wattley