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Surging demand for artificial intelligence (AI)-specific semiconductors and AI-enabled smartphones and laptops could create the next global semiconductor shortage, according to a report released Wednesday by consulting firm Bain & Company.
The most recent major semiconductor shortage arose during the coronavirus pandemic amid supply chain disruptions and increased demand for consumer electronics as people were forced to work from home.
Tech giants have been snapping up graphics processing units (GPUs), primarily from Nvidia, which are installed in data centers and are essential for training the massive AI models that power applications like OpenAI’s ChatGPT.
Meanwhile, companies like Qualcomm are designing chips that can go into smartphones and PCs and run AI applications locally, rather than over an internet connection in the cloud. These are often called AI-enabled devices, and companies from Samsung to Microsoft are releasing such products.
Bain said demand for GPUs and AI consumer electronics products could be contributing to the chip shortage.
“Surprising demand for graphics processing units (GPUs) is creating shortages in certain elements of the semiconductor value chain,” Anne Hawker, head of Americas technology at Bain & Company, told CNBC in an email.
“Increasing demand for GPUs, combined with a wave of AI-enabled devices that could accelerate PC product refresh cycles, could further increase constraints on semiconductor supplies.”
However, it is unclear how much demand there will be for these AI-enabled devices, as consumers appear to be cautious about them for now.
Bain & Company noted that the semiconductor supply chain is “incredibly complex, and any increase in demand of more than about 20% would likely tip the balance and create a chip shortage.”
“An explosion of AI at large end-market confluences could easily exceed that threshold, creating vulnerable bottlenecks throughout the supply chain,” the report added.
The semiconductor supply chain spans multiple companies. For example, NVIDIA designs GPUs, but they are manufactured in Taiwan by Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC), which in turn relies on chip manufacturing tools from around the world, including the Netherlands. Furthermore, only TSMC and Samsung Electronics can manufacture cutting-edge chips at scale.
Geopolitical factors could also be a factor in the semiconductor shortage. Semiconductors are considered a strategic technology by governments around the world. The United States has waged a campaign to limit China’s access to cutting-edge semiconductors through export restrictions and other sanctions. Meanwhile, the U.S. is trying to bolster its domestic semiconductor manufacturing capabilities.
“Geopolitical tensions, trade restrictions, and multinational technology companies
“The supply chain from China continues to pose significant risks to semiconductor supplies, with factory construction delays, material shortages and other unpredictable factors also creating a pinch,” Bain said.
