The chip shortage keeps getting worse – why can't we just make more?

https://www.bloomberg.com/graphics/2021-chip-production-why-hard-to-make-semiconductors/

by hhs • 5 years ago

409 443 5 years ago

bloomberg.com

amelius2• 5 years ago

Yes. Designing boards around the shortage is quickly becoming a new artform.

toomuchtodo• 5 years ago

Resiliency and degrading gracefully is beauty.

mrfusion5• 5 years ago

Any further reading on this? I’d like to understand it more. Are there certain chips that are plentiful that we could port a lot of software over to?

(Might be a good business opportunity if so)

jbay8082• 5 years ago

I would guess that the GP means designing such that your board accepts multiple footprints for compatible parts, so that if your first choice of op amp (or voltage regulator, etc) goes out of stock you can populate another one.

That might be a similar part by another company, or it might be an identical part in a different package (often ICs are available in two or three package shapes, and you might not be able to predict which ones will be in stock).

jmwilson• 5 years ago

It basically means order sufficient parts before starting layout or even before finalizing the schematic. It's not just microcontrollers that are scarce, it's also "dumb" ICs like power management, discrete logic, A/D interface, etc.

krisoft• 5 years ago

Are there certain chips that are plentiful that we could port a lot of software over to?

I sense a potential misunderstanding here: Not every chip runs code. Microcontrollers and processors do, but there are many different kind of chips. Some convert voltages, some massage signals, some drive motors, etc.

Why is this important? Porting code will only help you when you are swapping microcontrollers or processors. Which is just a tinny sliver of all the ICs in use. Porting code won't get you anywhere if what you are missing from your BOM is a boost-buck IC, or an opamp.

asdff5• 5 years ago

Time to start building clusters out of salvaged pentiums

joncrane• 5 years ago

Wasn't Wozniak an absolute wizard at minimizing chip count on circuit boards? What used to be a lost art is turning into one of the hottest skills around.

dvh• 5 years ago

https://en.wikipedia.org/wiki/Muntzing

butz• 5 years ago

How about using old hardware for longer and building optimized software that performs great even on old hardware?

fny2• 5 years ago

This isn’t about computers. It’s about all the other things that have chips in them. Look up SiC chips in particular, they’re in everything.

PeterisP3• 5 years ago

The simple things with chips in them don't (or shouldn't) have the expected growth of computing power that makes parts obsolete.

Like, if a washing machine or a car's fuel injector needs some chips, we should be able to reuse chips from older washing machines and older fuel injectors which we generally throw out because of a mechanical failure with all their electronics intact, but currently it seems that all these chips get just discarded, no one cares about them.

Gigachad10• 5 years ago

I'm looking at the supplier websites and trivial parts like 10 cent microcontrollers have over a year wait times. This is why I have been waiting for months to have the dryer I ordered and there is still no delivery date set.

I would have no issues going out and buying the latest macbook right now but basic other products are missing.

mrfusion5• 5 years ago

Or build low tech versions of products. No one really wants a smart tv for example.

ahtihn• 5 years ago

That's just not true. Most people are happy to have Netflix and other streaming apps integrated directly in their TV without having to acquire an external device.

ithkuil2• 5 years ago

The shortage also applies to low tech complements such as resistors.

Probably a healthy ability to reuse, repurpose, repair and recycle can be quite effective against the inability to just buy a new thing (regardless of whether the new thing is hi or lo tech)

version_five• 5 years ago

I would love low tech versions of a lot of stuff.

For a car, my guess is it's impossible to comply with modern emissions and safety regulations without ICs, not to mention the redesigning and retooling that would be required. I would suspect that these regulations have also basically evolved symbiotically with the industry to be a most for them, and they would have no interest in pushing to allow less complex cars.

For TVs and for cars, there are big revenue streams associated with things chips do, like serving ads and tracking what you do with your car, and well as making it impossible to maintain without a dealer. Companies would be very reluctant to shut this down.

None of this helps consumers, but I think that's where we are. Time to look at getting an old motorcycle maybe

galangalalgol• 5 years ago

I'd love a dumb EV. You need controllers for the charging of lithium ion batteries and for brushless or three phase ac motors, but even those could be asics or microcontrollers disconnected from the rest of the system. Switches, no touchscreens.

MonaroVXR2• 5 years ago

Isn"t thst you (as manufacturer) can make mire money by getting data from customers and sell it?

qualudeheart9• 5 years ago

I’m a proponent of that. Just rewriting old java or python monsters in an efficient language like Rust would easily give us an order of magnitude better efficiency.

A special class of theorem provers could be developed, proving that a program runs below a certain level of spacetime complexity.

This would entail a great increase in energy efficiency.

I also endorse holy information warfare against inefficient proof of work cryptocurrencies and a transition to efficient proof of stake.

wizzwizz48• 5 years ago

I like Rust, but gosh it produces the second-biggest bloated binaries I've ever seen. (Yes, it's mostly people using it wrong, though apparently I'm one of them.) The only thing worse is C++. (Again, probably people using that wrong, but that doesn't mean it doesn't happen.) Java and Python, by comparison, are tolerable, even when people use them wrong; when Java programs are huge, that's usually because of a mass of hideous “business logic” rather than a billion dependencies.

nomdep• 5 years ago

This practice of injecting Rust in every conversation no matter the topic, is getting tiresome.

baybal23• 5 years ago

I’m a proponent of that. Just rewriting old java or python monsters in an efficient language like Rust would easily give us an order of magnitude better efficiency.

Do not rewrite software in Rust, because Rust is not an efficient language. It's a memory, and RAM hog, and it's unstable, with major breakers every release. Switching to Rust is not a thing for a profit seeking enterprise.

In practice, it's an n-fold downgrade from good C on performance.

shawnz• 5 years ago

"Hypothetically", JIT can outperform native code given the right circumstances. Why not put more effort into improving JITs instead?

bserge3• 5 years ago

And who's gonna pay for that, Pushkin?

alasdair_• 5 years ago

Java is remarkably efficient already. I’d bet you won’t get an order of magnitude improvement.

908B64B197• 5 years ago

Bunch of SoCs and board have horrible patched binary drivers that will never be kept upstream.

Once the OEM sold the board, they made all the money so they don't care about long term support.

mindvirus• 5 years ago

This is an interesting article, but it doesn't answer why we have this shortage. Presumably without COVID, companies projected what demand would be for years out and could plan manufacturing capacities.

What about COVID caused the shortage? Is it shipping speeds? Change in demand? Less efficiency down the supply chain due to health requirements? Trade changes?

Bud• 5 years ago

You expected an actual useful explanation of a complex tech issue from Bloomberg?

The next time Bloomberg manages that will be the first time.

Completely, utterly useless for tech reporting of any kind.

YZF6• 5 years ago

Nobody knows for sure. It's a complex phenomena.

- Blame Toyota with their Just In Time inventory management ideas.

- Factory closures, lockdowns, etc.

- Increased demand for certain items. Everyone's at home surfing the web, playing games on their computers, mining bitcoin?

- Monetary policies are creating excess (see bitcoin mining) demand.

- Shipping delays. Ports running at reduced capacity. Ships sitting at sea waiting to get access. Suez Canal blocked. Shipping companies have no spare capacity. Blame Toyota.

- Building new factories takes time, getting/building new machinery takes time, everything was set up to not have any over capacity (since that's loss) ... blame Toyota again.

- Big companies swallowed everyone so we don't have as much diversity of products as we used to. Probably related to easy money as well.

tl;dr Toyota, Greenspan, Covid ... Somewhat in that order.

EDIT: Should probably add the trade war between the US and China to that list.

Multicomp• 5 years ago

- Blame Toyota with their Just In Time inventory management ideas.

Toyota had a stockpile [1] of semiconductors and are only now-ish running into the same supply problems everyone has been since March 2020.

[1] https://www.bloomberg.com/news/articles/2021-04-07/how-toyot...

But the Tohoku earthquake’s aftermath pushed Toyota to increase flexibility, and the value of inventory Toyota carries has almost doubled since 2011. Speaking at a briefing in February, Toyota Chief Financial Officer Kenta Kon said as part of the company’s business continuity plans, it keeps as many as four months of stock for some crucial components such as chips. Toyota didn’t expect the semiconductor shortage to disrupt production in the near term, he said.

georgyo• 5 years ago

Toyota may have been the people who pioneered Just in Time, but there are also one of the few car manufacturers that actually had a stock pile of components. They realized that supply chain disruptions are too damaging not to have a cache.

Saying blame Toyota is funny, but really all the execs who say a cost savings and took without consideration of supply chain problems are actually to blame.

nekoashide• 5 years ago

From my understanding companies projected chip needs months and years in advance but a few things happened.

1. Companies cut their orders expecting less demand and lost their place in line for orders.

2. Because of the rush to work remote so suddenly people needed everything from new computers for kids, monitors and accessories for a home office and in general a lot of stuff that used chips.

3. Because of Covid there were shutdowns at semiconductor manufacturers and even disruptions due to fire and weather.

Suddenly the entire supply chain went into shock, something that had been perfectly balanced between supply and demand was full of uncertainty. Now we have a situation where everyone is begging for chips and they cannot be built fast enough. Essentially the companies are behind on production and the demand is so high they cannot meet it. Everyone keeps predicting an end but it seems that manufacturers are still falling even further behind than they were before.

jpgvm• 5 years ago

Additionally when companies cut their orders other companies some fabs and other pipeline facilities were shutdown for retooling.

Most of the companies that cut their orders were auto and industrials that projected a prolonged downturn and didn't want to carry the inventory on their books. They predominantly use the components manufactured on less advanced process nodes.

Thus when demand for new process nodes was increasing and old ones were decreasing at the peak of the pandemic it made sense for pipelines to retool to meet that demand instead.

On top of that US-China tensions means SMIC and Hua Hong Semi are now banned for many US producers which is further constraining supply. Also creating asymmetry where China is experiencing lesser a supply crunch. However there is also trouble brewing there due to Trump forcing the Dutch to block export of ASMLs new EUV lithography tech to China. This means they aren't able to start building fabs w/EUV to fill the coming supply gap there either but instead are now having to pour billions into their own lithography progam. Long term this will be good for the market (but very bad for ASML most likely) but short term its not great.

asdff5• 5 years ago

Why don't semiconductor manufacturers just cut old orders and refund their customers, who would go on and refund their customers? It seems like the financial hit from cancelling old orders and resetting production like this would be what insurance is for, and you'd no longer be fighting a backlog but just taking in orders as they come like you've always done.

mjevans• 5 years ago

First, all the predictions went sideways. Consumers needed, not just wanted, more cars and equipment to function as PPE. As their mobile personal protective transit bubbles. As their remote-work conversation devices. As new types of hardware that weren't being used for those economic functions before. Even as webcams and the like.

Second, the quarantines combine with unemployment that frees an abused workforce from abusive conditions. Instead of being wage slaves forced to take any job what-so-ever workers are able to demand jobs that value safety protocols, pay well enough to live in an area (which is also extra insane right now), and have reasonable hours (enough, the right times etc).

Third, (rent) given a combination of working from home, closed 'entertainment' venues, and general quality of life concerns many have decided to flee the high rents of cities for suburban and even rural areas where their money goes farther. This causes more desire to purchase and more wasteful food packaging and production at home as well. Everywhere around me prices have gone up on eating out something like 25% since the start of the pandemic; my wages have not. So instead of eating small portions of bulk shipped and prepared ingredients I'm now eating at home more, mostly frozen stuff. The price of rent didn't quite increase that much but housing is also insane right now, just like even used cars, due to the supply crunch.

Supply correction is how we as a culture, country, and world escape this problem. Increasing supply in all of the problem areas is the only way out.

Supply means buying power goes up, irrespective of wages. Those misguided attempts to raise everyone's minimum wage (tax the middle class, since the elite who own the rentable units will just raise their rates) would work far better by decreasing the cost of a better life. It could also be targeted towards desired resources, growing out of undesired patterns and standards which is also opportunity for better energy efficiency.

tehjoker• 5 years ago

since the elite who own the rentable units will just raise their rates

We could also just make the elite pay for it. Just saying.

callmeal• 5 years ago

What about COVID caused the shortage? Is it shipping speeds? Change in demand? Less efficiency down the supply chain due to health requirements? Trade changes?

Take a look at "the beer game". One of the lessons from that game is that a single change in consumer demand causes a wide variety of supply chain disruptions. This lesson was learnt in the 1950s and unfortunately it looks like they stopped teaching this in mba schools, so we have to learn it the hard way all over again.

[0] https://www.shmula.com/the-bullwhip-effect/310/

bavell• 5 years ago

Insightful link, thanks! I knew this info intuitively but didn't know about the beer game, really interesting! Nice to have a little more theory to back up my understanding.

ineedasername4• 5 years ago

Wow, Factorio is an extremely complicated version of the beer game. It's especially obvious visually for my hacked-together systems when I get to the flying drone stage and the drones exhibit the movement patterns like those on the charts in your link. I hate that game.

clairity• 5 years ago

"...unfortunately it looks like they stopped teaching this in mba schools..."

why do you believe this? we worked through that simulation as part of my mba program some years ago, and mba friends at other schools said they did the same. the bullwhip effect is such a core concept to operations management that it's hard to believe it wouldn't continue to be taught, though perhaps with an updated simulation demonstrating its effects.

baybal23• 5 years ago

There is a very simple explanation. China is a >60% of the world chip market, and probably is even more now since China was the first country to reopen: https://daxueconsulting.com/chinas-semiconductor-industry/

Giant stocks of everything started to vaporise overnight, all at the around same time last November.

I have a few STM32 reels of different models some of which I can now sell at $10 per MCU. A 100-fold increase in price, that beats any bitcoin.

The starvation of seventies, and hungry eighties have taught Chinese a thing, or two about shortages.

People in the ex-USSR countries had the same tendency to run hoarding stuff on every economic doom announcement.

eunos• 5 years ago

It's less about USSR and more about Trumps trade and tech war.

hristov• 5 years ago

There is one important factor that nobody in the popular press is mentioning. Few analysts in the financial industry are starting to point it out.

And that is that semiconductor manufacturing has been chronically and almost criminally underinvested. The coronavirus pandemic was just a triggering event that brought the whole house of cards down.

The thinking in the financial world for the past 10-20 years has been that software is the hot, growing license to print money industry and actually manufacturing chips is a dirty, competitive, low margin, low return on capital industry best left to the Asians. And of the actual chip manufacturers the ones to be most favored were the ones making digital chips and the ones making analog and power semiconductors were the dirtiest most disliked commodity like companies.

Even within the semiconductor world, the financial world heaped money on fabless semiconductor companies like stock market darling Nvidia and did not give much respect to the companies that owned the fabs and made the chips. And even less respect was paid to the ones that made power and analog chips.

Guess where the biggest shortage is now. In power and analog. Also, in packaging, another field that was considered unsexy, low margin and too competitive to bother with.

Everybody talked about how software is eating the world and heaped massive amounts of capital on software companies but they kind of neglected the important role of semiconductors. And even when they talked about semiconductors they talked about the "important" ones, the "brains" of the computer, the cpus and the graphics chips.

So while software companies (especially SAAS ones) would have license to lose large amounts of money and still have receive endless streams of capital, companies that manufacture chips would be judged severely by the market on profitability and free cash flow. This is especially true for analog and power semi manufacturers.

Free cash flow is a very dangerous metric for a growing industry. Capital spending gets subtracted from cash flow to arrive at free cash flow, which means that if a CEO is judged by free cash flow, he will try to minimize capital spending. That of course will hurt future growth.

I have been investing in analog and power semiconductor companies for many years now, and the CEOs of all these companies knew that a jump in demand was coming. But they all wanted to keep their jobs so they all talked about how they will grow their revenues by minimizing capital outflows etc. If they were cheered by the market for having cash outflows of the type many SAAS darlings have, we would be swimming in semiconductors right now.

For example, if some one wants to do some further reading, check out old investor presentations of Texas Instruments. By old I mean a couple of years ago, before coronavirus. Probably the largest power and analog semiconductor manufacturer in the world. Their entire sales pitch to investors was about free cash flow and capital return to shareholders. That is great for many types of shareholders, but this is not something a high growth company should be doing. Needless to say now they are swamped by demand and do not have production capacity anywhere near to what demand is.

There is another peculiar quality of semiconductors. They are easy to store and they do not go bad after taking some minimal precautions in storage. This means that any rumor of a shortage and price increases causes everybody that uses semis to go out and buy out everything the suppliers will let them buy.

So there is a very unstable situation. A- there is a shortage and B - even the possibility of a shortage causes hoarding behavior that makes the shortage worse.

That already unstable situation existed before coronavirus. And then coronavirus came. And it triggered a heightened demand for semiconductors. And that triggered a snowball effect of hoarding and higher prices, more hoarding, etc.

The solution is that prices should go up (already happening). Stock prices of semiconductor manufactures should go up. And here I mean actual manufacturers, not fabless chip designers. This should happen especially for analog and power semiconductors where the biggest demand and the biggest underinvestment lies. This has not happened as much as it needs to. Higher stock prices should cause more money to go to the fab business and that should eventually result in the necessary growth in semiconductor manufacturing.

All of this will take time. And meanwhile there will be a lot of hoarding. There may also be occasional panics where the hoarders dump a lot of hoarded inventory thinking prices are going down, cause prices to go down and later discover that prices are shooting back up again after their inventory gets used up.

But in the end hopefully we should end up in a world where (1) there is much more investment in semiconductors and (2) we eventually get all the benefits of the wealthy, high production, environmentally sustainable, all electric future we have been dreaming of.

sytelus2• 5 years ago

The problem is that stock prices are not going up. TSMC actually tanked (I lost money) mainly because various governments pledging for domestic production which is probably still 5 years down the line. This only further aggregates the shortage.

ineedasername4• 5 years ago

By old I mean a couple of years ago, before coronavirus

So much from before seems old and foreign. Definitely one of those events that marks a definitive before & after... and during, since we still don't quite know how or when things will settles out to a new normal.

jbay8082• 5 years ago

Great analysis, just one point:

The solution is that prices should go up

Prices at resellers are going up of course, but there's a reason why TI, On Semi, Nexperia, etc might prefer to stock out at a low price than to have product available at a high price: they still want to be selected by cost-sensitive design engineers who are designing products that will be on the market well after the shortage is over.

varjag• 5 years ago

It wasn't COVID that caused the shortages, although it did exacerbate them. We've experienced first disruptions during previous administration trade wars with China around 2016-17. They never really went away since.

wonnage• 5 years ago

The trade war didn't help, China started buying massive stockpiles of chips before the restrictions kicked in: https://www.scmp.com/tech/tech-war/article/3120304/us-china-...

It's a little dumb that basically all advanced chip manufacturing in the world happens within a thousand mile radius of Beijing and we're over here an ocean over wondering where our supply went. More energy needs to be focused on made-in-USA and less on the thing we have no control over

digikata• 5 years ago

The article is long on speculation, but really doesn't have even basic data such as inventory or shipped component levels to do the the most basic verification of the theories.

Are we shipping more chips than even, only demand is allocating unevenly?

Are covid + multiple factory incidents at fault?

Even the cost the stay at the cutting edge facts seem a little suspect for at least some chip markets. e.g. embedded chips such as for automotive use are generally are multiple generations behind fab technology - and really don't need to stay on a cutting edge fab to keep profitably producing for many industrial embedded components.

mrfusion5• 5 years ago

Are there any estimates on when the shortage might be over?

lvl100• 5 years ago

When this run in crypto is finished.

mrfusion5• 5 years ago

I thought crypto was mostly gpu though?

sneak2• 5 years ago

This is not remotely the basis for the shortage. It is the basis for the high price of GPUs.

There are massive shortages at all process node sizes AIUI, not just the cutting edge.

qualudeheart9• 5 years ago

I welcome the chip shortage.

I implore the national security state and the intelligence community to take action and intensify this trend.

Thus the advance of artificial intelligence will be slowed and we will have more time to practice AI regulation and control.

Only then may strong AI be permitted to eventuate. Otherwise it may destroy us. He who develops AI would be punished severely were we to live in a just world.

We need a butlerian jihad against AI, led by the national security state, equipped by the brave men and women of Anduril incorporated.

The damage to the rest of the economy is unfortunate but a cost I am willing to accept.

Now what do we actually need that hardware for, aside from training language models or mining bitcoin?

Why don’t we also develop more efficient software? Why don’t we pay people to do so? Many of you in this thread could work on this, and be paid handsomely for it.

nightfly• 5 years ago

What are you afraid AI will do?

andrewnicolalde• 5 years ago

Perhaps to further what oppressive humans have long wanted but not previously had the capability to do.

qualudeheart9• 5 years ago

The main threat model is a Yudkowskian rapid takeoff where artificial general intelligence recursively self improves far beyond human intelligence, making it like a god with absolute power compared to us. This corresponds to the agentic model of artificial general intelligence put forth by Bostrom.

Yudkowskian AGI might fail in the long term since it would run into Gödelian problems it would never be able to solve but infinitely loop on.

That humans are immune to those and can behold contradictions testifies to a Penrosian supra-turing-machinic aspect to the human mind.

Man has a transcendent aspect even if we may not be meta-cognitively aware of it at all times.

AGIs could possibly be destroyed through the use of such problems, akin to magical spells wielded by powerful magi.

A secondary threat model of mine is based on a world of non-general, non-agentic strong AI with many discrete “tool AIs” with superhuman ability in one unique area.

The secondary model is mostly harmless except for military AI. The genius of Andúril Incorporated lies in their creation of drones designed to destroy other drones.

This future is still very dangerous, and I hope that the security state will take action to prevent it’s arrival.

mathverse• 5 years ago

It's not only chips.It's everything.Timber,iron,steel,building materials, certain types of food.

It's the increased consumption of these goods because of insane lockdowns all around the world.People did not spend money on holidays but decided to upgrade their homes and electronics.

laurent92• 5 years ago

Or is it the adolescence of China, once a baby in consumerism, now a hungry teenager engulfing all the calories it can?

pphysch• 5 years ago

Or is it the ongoing & economically unjustified printing of multiple trillions of USD since 2020, which forces firms globally to move away from money or get ripped off?

sbierwagen• 5 years ago

Lumber peaked back in May at $1,600. It's down to $576 now: https://www.nasdaq.com/market-activity/commodities/lbs

imtringued• 5 years ago

Oh no hyperdeflation is coming!!

I am honestly tired of this. Yes we had a pandemic but we didn't have a war that killed and destroyed the very thing that produces the things that we are short of right now.

quickthrower23• 5 years ago

Why are lockdowns insane for a novel, highly transmittable and deadly and mutating virus for which there was no vaccine and although there is now it is not rolled out enough globally yet.

eande• 5 years ago

Old article May 5th of this year, which in that industry is a long time. Nevertheless the situation since did actually get worse as predicted. Not only is it chip shortage we should call it component shortage. A standard 10k 0406 package resistor is sold out around the world. Many high quality, high density capacitor you can't get. The same goes for the standard semiconductor parts like diodes, MOSFET or TVS. Semiconductor sales rep give you now +50 weeks lead time for the many ICs meaning no real forecast at this point. They generally tell you 2022 will be tough maybe Q4 will ease up.

Many of the major semi companies are running at fairly high capacity, but supporting elements like IC package build capacity, sometimes materials can't keep up as well.

We looked at some boards to redesign, but when you are short hundreds of parts it gets nearly insurmountable to manage a hardware redesign. Interesting and challenging allocation period, definitely worse than 2003-2005.

wereHamster• 5 years ago

Is the shortage of common components (such as the 10k 0406 resistor you mention) due to: increased demand that can't be met due to unavailable capacity or because the manufacturers scaled production down during the past year and now there is no capacity to scale it back up? Or because supply chain shortages that feed the fabs (raw materials)?

baybal23• 5 years ago

Passives are actually quite quick to produce. I think it's a good proof that a few giant distributors in China keep buying, and flushing them down the drain.

phkahler2• 5 years ago

With consolidation, some of the less common component values are being discontinued. I would imagine the same may be happening with standard values in larger sizes and 0406 is kinda big these days.

Longer term this shutting out of companies not on the leading edge will result in other changes. Components fabricated integral to the PCB being one such change.

sytelus2• 5 years ago

Shortage in supply is everywhere. Even in labor market. While walking around I cannot pass by without a desperate plea for staff needed. I see businesses closing down literally because of shortage of staff. It’s as if half of humans suddenly disappeared and other half decided to consume massively.

tpmoney• 5 years ago

The other half doesn't need to consume massively, just at the same rates they always were. When every step along your just in time supply chain is running at 50% capacity, the end output is even lower than 50% capacity.

londons_explore2• 5 years ago

Or... Everyone has decided to consume massively because a lot of people feel rich after COVID (same income, no holidays, travel or social expenses)

garmaine2• 5 years ago

Both halves are consuming massively thanks to pandemic relief funds and bonus unemployment. Why do you think there’s a labor shortage? You can get paid more money to sit on your ass and order things on Amazon.

a3n• 5 years ago

Truck driver. Besides Walmart (my major shopping store, because you can park a truck up in there), truck stop convenience stores are chronically short of things in the last N months. I know, the irony ...

Unflavored half and half single servings for coffee go early. The bulk half and half dispensers are usually empty these days. (The flavored side is often still available.) Then coffee lids. Then large coffee cups. Gatorade Zero often goes, and then regular Gatorade. The Power Aide seems to always be available. The open cooler boat with yogurt and sandwiches often runs low or empty.

Vicious cycle of staff shortages everywhere, thus unable to source, produce, deliver and stock at former rates.

Kiro• 5 years ago

I'm constantly surprised that so many things in IKEA are out of stock. I've been shopping at IKEA for 20 years and never experienced this before.

j1elo• 5 years ago

Turns out there is no shortage of people wanting to work. But there is a shortage on people wanting to be a slave of their job for a misery as compensation. So restaurants here keep complaining how come nobody wants to work with them.

EDIT: I'm not joking, the salaries for mostly any position in a bar or a restaurant in Spain tend to be a joke with long hours and shameful conditions. Paying in cash to avoid taxes is a common thing. Doing extra hours without extra compensation as law requires. You don't like it? Ok bye, you're fired, and we'll complain to the news reporter on TV, about how nobody wants to work any more nowadays.

malwarebytess• 5 years ago

Come on, it's obvious what the cause is. We meddled with and shut down large parts of the world economy. What hubris wouldn't expect there to be problems of rubberbanding supply and demand when we so deigned to restart them?

This was a problem that was forecasted by many heterodox shutdown detractors. These "shortages" are caused by our politicians and bureaucrats making terrible decisions unilaterally.

lifeplusplus• 5 years ago

This is downstream effects of housing crisis. Rents have finally hit a point where even slaving away at minimum wage is not enough. Why live and work in a place where even after full time you will only further go in debt. How about just move to cheaper area or do go in debt but might as well do something less stressful. Either way financial situation is gonna be same.

Animats4• 5 years ago

0406 package? That's an odd size, apparently made only by Vishay, and yes, they're out of stock.

erosenbe04• 5 years ago

It's likely for low resistance and temperature stable precision current measurement so the package design can contribute to stability. Vishay is a leader in that stuff.

erosenbe04• 5 years ago

Journalists are clueless.

Intel doesn't make 10nm chips that you put in a car or bulldozer or telecom box that has to bake in desert heat. Some of their older process stuff, yes, but not the top.

tpmx3• 5 years ago

I've been wondering:

How much of this is caused by component fragmentation?

As an example, Digikey lists a staggering 55k separate microcontroller variants (active products):

https://www.digikey.com/en/products/filter/embedded-microcon...

YZF6• 5 years ago

You'd think that would be a positive? Presumably only a very tiny fraction of those are suitable for automotive applications e.g. also presumably some of those were only made in smaller quantities trying to hook some big customer.

I think we've always had a pretty large variety of microcontrollers, just something like an 8051 was available in hundreds of options from various companies. Microchip has always had lots of different ones with slightly different options. Sometimes (often?) those are the same die in a different package with some different build time options enabled.

tpmx3• 5 years ago

I'm not following you how on that would be a positive (in a chip shortage situation).

Say you use 50 microcontrollers in a car. Probably 15+ separate part numbers? One or two of those can't be acquired, so boards need to be redesigned and the production line is held up.

Now, imagine a different world with wide cross-licensing between manufacturers and instead of doing hundreds of separate variants slighly cost optimized for various purposes for each major microcontroller design, let's just have a small number of kitchen sink variants.

jhgb4• 5 years ago

You would have thought that the whole point of microcontrollers was to decrease the number of different chips that have to be manufactured on the basis of them being programmable.

kiwidrew• 5 years ago

Not only that, but most of those microcontrollers are single-source, which amplifies any supply chain issues because you have to wait for your specific MCU to become available; there are no 'drop in' replacements any longer.

intricatedetail2• 5 years ago

Sometimes you can get MCU with the same pinout but missing certain features. Can be a way out if your product does not need those. Unfortunately I find any possible replacements are gone too...

boznz• 5 years ago

Maybe we need an open source set of microcontroller package footprints so they are at least pin compatible ?

bserge3• 5 years ago

Huh, this made me wonder, is there a reverse auction marketplace of sorts, where a buyer places orders and all the sellers provide a small or big batch, or fill the order completely.

Seems like it would be a great addition to any existing marketplace.

Taniwha• 5 years ago

No good engineer wants that - we want one manufacturer's chip that we've tested and qualified, maybe a spare just in case.

We've all been bitten by someone substituting in a 'equivalent' that 'ought to be the same'.

Mixing in random chips into random boards would be a nightmare to track down when something goes wrong

buitreVirtual• 5 years ago

"Former Intel Corp. boss Craig Barrett called his company’s microprocessors the most complicated devices ever made by man."

Not very smart to boast about this. So AMD makes more performant chips with less complicated designs?

jml7c5• 5 years ago

I do wonder how much of this is exacerbated by hoarding. Similar to the Great Toilet Paper Shortage, where fear of continued shortages caused panic buying which caused extended shortfall of supply. And that was in an industry where production was not constrained and warehouses were full!

11thEarlOfMar• 5 years ago

If we can find availability of any of dozens of parts we are short, CEO orders are to buy out the inventory.

Hoarding is a component of the shortage, and may be the both trigger and cause for extending the problem from months to years. Semi companies are buying new equipment at record levels, but even the equipment companies are thrashing to find chips to control their equipment.

Analysts may want to keep an eye on balance sheet inventories at electronics manufacturers like Jabil, Flextronix, Fabrinet and their ilk to get an idea of the extent of hoarding in the market.

intricatedetail2• 5 years ago

You can buy any chip that is not available from legitimate sources in China in pretty much any quantities. I wonder at this point if this is not a part of hybrid warfare.

bloggie• 5 years ago

I have to imagine there is quite a lot of hoarding going on, but by a different name. Normally I buy components for the next 6 months of expected use. TI sent me an email a couple weeks ago asking me to place orders for the next 18 months of use to guarantee delivery. So there I go placing orders for 3x what I normally buy. But it isn't hoarding, it is guaranteeing allotment.

The part brokers have locked in their quantities months ago, also increasing demand. What are you going to do.

mlang237• 5 years ago

Perfect timing, for once. In 2019, I jumped onto the Sonos train, got rid of a bunch of old hardware, (finally) replaced my desktop with a ThinkPad X1. In early 2020 (before the first lockdown) I completely redid my little "home office", investing in 4 combinable tables, a new 8-channel USB soundcard, a MIDI controller, and some more stuff I should always have had... Two weeks after I managed to clean out the apartment from old tables and stuff, lockdown came. In summer 2020, I finally got the long-overdue replacement for one of our HPC clusters at work. Neitzer at work nor at home do I plan to invest any money into hardware in the next two years. Sure, it might sound easy from where I am to say that, but I find this period of the world a perfect time to do some consume consolidation. Looking back, I surely spent a bit too much on hardware over the last 20 years. Thats fine in the first few years of your career, because after all, those are not just toys, they actually help you acquire knolwedge. However, after a time, it somehow becomes silly. If I am true to myself, there is really nothing I need right now. And I guess that applies to more people then just me.

rossdavidh2• 5 years ago

While it is obviously not unrelated to the pandemic chaos, there is a deeper issue. As Nassim Taleb has often pointed out, the same things that make a system "efficient" also can often be viewed as making it fragile. "Just-in-time" means "no buffer". We have, for decades, been doing as much as possible to make all our economic systems as efficient as possible, which is to say with no extra capacity.

Thus, if it had not been the pandemic, it would eventually have been something else. Sooner or later, there is always a shock to the system. If you have made sure that every step in a long complex chain is optimized to have very little slack, the thing you have optimized for is fragility.

fny2• 5 years ago

Given you can't predict what the shock will be or its consequences, how are you exactly going to create a buffer? Creating broad redundancies would result in lots and lots of waste both damaging to a bottom line and the environment.

Also, is this "fragility" really that big of a problem? Sure, prices are going to move up 20-30% for a year or two until the supply chain issues ease, but is that worth driving up costs for decades preparing for potentially the wrong issue?

keoqpkk• 5 years ago

We don't really put a price on environmental and societal damage that "just-in-time" does (thinking of truck drivers living on the highway effectively acting as the warehouse, saving the company to build an actual warehouse).

If we did, more robust models might be financially attractive too.

toomanydoubts• 5 years ago

prices are going to move up 20-30% for a year or two

I have never ever in my whole life seen prices going down after they have gone up. Ever.

dharmab• 5 years ago

Toyota has this figured out. After the 2011 quake they built a system to identify critical, difficult to replace parts in their supply chain and size buffers for those parts. Any they aggregate demand over larger time intervals than other manufacturers. They lasted 18 months into the pandemic shortages before they ran their buffers dry.

flyinglizard4• 5 years ago

How much of a buffer can you possibly maintain to deal with a year long economic disruption, which changes both supply (by lockdowns and factories being offline) and demand (by a shift in consumer spending mix and free government money)?

It's impractical to keep 12 months worth of supplies for manufacturing, even when you don't try to do lean manufacturing - just plain old manufacturing. It's something you need to finance, parts getting obsolete and product designs in some categories iterate every year or two.

We just need to deal with this new reality. You can do your best to avoid the worst case scenario but it is after all a statistical inevitability, so you just ride through it.

As I said on another comment here, though, this is going to have long standing effects on the other end of the disruption. We're going to be left with huge over capacity, unclaimed stocks and companies that couldn't produce parts will have their customers design out their parts for whatever else they can get their hands on. This is a golden opportunity for the smaller players in the industry. How giants like ST, TI and NXP will deal with this long term - I'm not quite sure. Many companies in 2021 and possibly well into 2022 who would normally design their products with TI parts will not do that because they can't even get samples, let along ramp up production.

jdavis703• 5 years ago

Toyota (famous for lean manufacturing) built redundancy in to it’s supply chain and only recently has run in to chip shortages. It may be hard, but it’s certainly possible.

0: How Toyota Steered Clear of the Chip Shortage Mess

photojosh2• 5 years ago

This is a golden opportunity for the smaller players in the industry. How giants like ST, TI and NXP will deal with this long term - I'm not quite sure. Many companies in 2021 and possibly well into 2022 who would normally design their products with TI parts will not do that because they can't even get samples, let along ramp up production.

I'm currently designing with STM32 parts and bought the last hundred available anywhere in the world, but that's only enough for a field trial, not for production. The only ones left in any quantity at at all are the insanely high pin count BGAs and chip-scale packages... no way.

I looked at TI, NXP and Microchip parts too. There's plenty of older 8-bit microcontrollers available, so if you want an AVR or similar I think you'll be fine because they're on older processes that aren't in as much demand.

If there really is an alternative from a "smaller player", I'm all ears.

jjk1664• 5 years ago

It's impractical to keep 12 months worth of supplies for manufacturing

They didn't need to. The initial disruption was only a few weeks. The problem is that once companies saw that there would be a shortage, they started buying up all the supplies they could to rapidly build up buffers, which increases the demand for those supplies worsening the shortage, which in turn means even larger buffers are required. It's a vicious cycle that all could have been avoided.

AYBABTME• 5 years ago

perl4ever had an interesting comment that they deleted after being downvoted for some reason. I'm happy to take the downvotes because I think their take was a thoughtworthy counterpoint.

* * *

"Just-in-time" means "no buffer"

No, it doesn't. It just means the buffer is somewhere other than where you assume it's necessary. That may in fact be a net gain. Computers and cars and whatever don't wear out instantly. It will be a long time until all the newest equipment that already exists is old enough it absolutely has to be scrapped. In some other thread on HN, someone said that everything depends on manufacturing, and services don't mean anything without manufacturing capacity. Services! Like maintaining and repairing what's already been manufactured! Like, for an extreme example, what happened in Cuba when they couldn't get new cars for a long time. Or during WWII when civilians couldn't buy new cars. Day in and day out, people talk about how terrible a disposable society is, and then we have a crisis that requires like 1% less disposal and it's the end of society.

mlang237• 5 years ago

I also got downvoted for stating that I feel I have enough HW and can live a few years off what is there. I guess people have been trained to get the newest thing every year, that it now hurts them bad to not be able to do so for a few months. And yes, I agree, this could be a wonderful time to actually strengthen our knowhow regarding keeping things alive, instead of just throwing them away. Sounds like a great chance for the climate change people. How is the market for used equipment doing btw?

nixpulvis2• 5 years ago

This comment was probably down-voted because it completely misses the fact that not everyone already has access to the needed resources. Sure, even if you already have everything you want/need now, and you own high enough quality parts, you may be golden for a decade or so. Eventually though, you'll need replacements. If access to those replacements is limited, how much value does the rest of your scrap really have?

Creative outlets for junk are going to continue to become more and more fashionable as we struggle to meet our values and practical prices.

Renaud• 5 years ago

I think the message is true but misses a major point: yes, using existing hardware, we generally have some buffer though the simple fact of delaying replacement or new purchases. Equipment can recirculate (second-hand) and be maintained.

What is being missed are the larger societal needs for new hardware. If you build infrastructure (new public transport line, factory, power plant, communications network, etc) you need new components, lots of them.

The impact of shortages gets projects delayed or cancelled due to lack of availability of components or ballooning costs. It's also not just electronics, it's also shipping and raw materials costs that are impacted.

xadhominemx2• 5 years ago

I don’t think it would have been without the pandemic, mostly because remote work and education has dramatically increased demand for PCs. There is not a ton of excess capacity especially at the wafer fab level, so PCs running 25% higher than expected was enough to push the industry into shortage. There still would have been a cycle (driven by inventory stocking / restocking), but the shortage would not have been nearly as acute.

bserge3• 5 years ago

Funny enough I believe it's not even the real consumer/end user demand.

It's just companies anticipating or seeing the same thing (an increase in consumer PC demand) and all releasing their own shitbox/AIO/desktop/laptop.

I bet most of them are sitting in warehouses unsold.

tsywke44• 5 years ago

Nope, not just PCs, just electronics in general.

The pandemic allowed tens of millions of well-off western office workers to move out of tiny urban flats into more spacious housing. While having to spend a lot of time in their new homes, which was previously in ”public” places (eg restaurants, bars, what have you)

Now, what to do with all that space? A giant tv, washer and dryer, a nice stereo set, new induction stove, the list goes on and on…

PC demand also increased obviously, but probably bitcoin miners caused the most demand for PC hardware components

chx• 5 years ago

The automotive industry scaling back and cancelling orders in the beginning of the pandemic and then being shocked when their orders came back, increased even and the chip manufacturers couldn't just step up was a serious factor too.

yskchu• 5 years ago

"Just-in-time" means "no buffer".

Just in time doesn't necessarily mean no buffer, the goal is to minimize excessive stockpiling and keep enough for continuous production, increasing stockpile when required.

Toyota, some might say THE pioneer of Just-in-time manufacturing, was one of the car manufacturers least impacted by the component shortage precisely because they started stockpiling very early on after they saw the upcoming issue.

Here's a quote from another Bloomberg article specifically on Toyota[1]:

"Toyota asks its Tier 1 suppliers to input detailed information about their most obscure parts and materials providers in a complex database that it maintains. Using this system to glean information about, say, a single headlight Toyota purchases for one of its cars, it can get information as granular as the names and locations of the companies that make the materials that go into surface treatments used on those headlights’ lenses and even the producers of the lubricants used on the rubber pieces in the assembly, Toyota spokeswoman Shiori Hashimoto says.

These lines of communication alerted the company early on that it needed to stockpile chips."

[1]: How Toyota Steered Clear of the Chip Shortage Mess - https://www.bloomberg.com/news/articles/2021-04-07/how-toyot...

Spooky232• 5 years ago

The difference is that Toyota is a uniquely intelligent company with respect to supply chain.

The average American manufacturing company is run by a CFO operating with reports out of SAP or Peoplesoft. Their performance is measured by fiscal performance, so running to the penny and having no inventory benefits them more than making the company resilient. Wall St rewards quarterly performance, not resilience.

gauravjain13• 5 years ago

Seems like a low-on-details article with PR-like flavor.

According to this, Toyota cut production by 40%, though it does acknowledge that Toyota took less of a hit vs industry:

“New cars often include dozens of microchips but Toyota benefited from having built a larger stockpile of chips - also called semiconductors - as part of a revamp to its business continuity plan, developed in the wake of the Fukushima earthquake and tsunami a decade ago.”

https://www.bbc.com/news/business-58266794

xxgreg2• 5 years ago

All of the car companies, dialed down orders at the start of the pandemic. Now they are all trying to stockpile chips, due to not enough supply. I imagine (no data to support) the increased size stockpiles are a large part of what makes the problem worse. Kinda like TP really.

Also, Toyota is now cutting 40 percent of global production due to chip shortage.

https://www.bbc.com/news/business-58266794

jonahrd• 5 years ago

This is actually also discussed by Nassim Taleb in his book which I assume the parent comment is referencing.

He says Toyota is one of the few examples where just-in-time was not distorted and warped. So Toyota implements true just-in-time, which can be robust, with buffers. But most other companies implement a half-assed version that is very fragile.

temac• 5 years ago

The thing is that you can not apply this method (suddenly stockpile because of anticipated shortage) globally. Now of course, putting gratuitous buffer everywhere would not be the panacea either. But some buffers may be needed to improve global resiliency.

One has to optimize to reduce fragility, but when massive chip (or anything else) shortages start to appear for extended periods it is obviously already way to late. And way too downstream if your strategy was just a punctual stockpile decided by a single company. Because that probably would have been impossible for everybody to apply this punctual strategy at the same time...

domnomnom• 5 years ago

What's the quote about selling someone a product whose faults will occur when you're years gone and half way around the planet? I wonder how this mentality is avoided/regarded in Japan.

xyzzy21• 5 years ago

It PRIMARILY DOES mean this as it's IMPLEMENT in 99.9% of businesses. Toyota's implementation is NOT NORMAL OR COMMON.

sixQuarks• 5 years ago

What you fail to mention (although you linked to an article that covers it) - is that Toyota was prepared due to the setbacks they suffered in the Tsunami. If it wasn't for that, they would not have stockpiled for and been ready for a pandemic. Even so, they are now dealing with chip shortages as well.

8ytecoder• 5 years ago

I think this papers backs up pretty well and goes into a lot more details of why it matters to focus on the flow. In fact it’s crucial that such issues that stop production including predicting and identifying demand-supply mismatch is essential for a smooth flow of operations. BUT, humans are humans and we plan for the best case scenario without giving due consideration for failure modes. Manufacturing is hardly an exception.

https://businesswales.gov.wales/sites/business-wales/files/S...

listenallyall2• 5 years ago

"least impacted" = 360,000 Toyotas not being built this month, or 40% of normal production.

https://www.bbc.com/news/business-58266794

juskrey• 5 years ago

Toyota is underwater like everyone else. When you have signal, it is already too late

sails• 5 years ago

I wonder if they track the financial status of these far upstream suppliers. I've been doing some work with supply chain monitoring and often smaller companies in Europe are hesitant to share information on financial performance etc

afarrell• 5 years ago

Just-in-time, done mediocrely, still means “no buffer”. What Toyota does is not all that relevant to the discussion.

radley2• 5 years ago

There's a really good (free) interview on the Verge with Dr. Willy Shih who explains whats going on:

https://www.theverge.com/2021/8/31/22648372/willy-shih-chip-...

TLDR: it essentially was the pandemic: cancelling orders -> redirecting supply -> too late to uncancel + competitive hoarding.

radley2• 5 years ago

There's a really good (free) interview on the Verge with Dr. Willy Shih who explains whats going on:

https://www.theverge.com/2021/8/31/22648372/willy-shih-chip-...

TLDR: it essentially was the pandemic: cancelling orders -> redirecting supply -> too late to uncancel -> low supply + competitive hoarding. Plus a 10 year $150B head start.

ksec• 5 years ago

"Just-in-time" means "no buffer".

Personally I have been ranting about the Modern use of Just in time manufacturing for well over a decade. Just in Time manufacturing as it originate in Japan doesn't actually means no buffering. Somewhere a long the line in typical Chinese whisper fashion the true meaning got loss when it go to the west. If you are software developer, just like at Agile and Kanban board.

The problem make worst when CEO and COO dont actually understand this, and force those in supply chain to comply with their view of JIT. It works in a sense when everything is normal. It doesn't work when there is a shock. Look at Apple, the only company that took JIT to a level beyond Toyota. They are doing just fine while others are fighting for parts.

The other thing worth pointing to is that this isn't just chips, but also every other commodity. The reason behind all these different industry are exactly the same. You could have swap the title for Beef, Poultry, Steel, Toilet Paper, Mask, Chips, Milk, Pencil, paper etc... I really do wish people learn a little about how supply chain works. It is the fabric of our daily life and yet very little attention has been paid to it.

mhb• 5 years ago

Maybe you should rant a little here about why just-in-time doesn't imply no (or minimal) buffers. If not, what does it mean?

trixie_• 5 years ago

The pandemic caused companies to buy chips like people were buying toilet paper.

Gigachad10• 5 years ago

If every company suddenly decided that they now want to keep a years stock of their important parts rather than a week, the demand just went up 52x right away. It's no surprise even basic parts are sold out for the next year at least.

swsieber• 5 years ago

It got me thinking that a buffer is really just operational insurance, and the cost is "efficiency". I wonder if it's the same average efficiency. If so, my knee-jerk though is that I much prefer the smooth buffered model as opposed to the spiky unbuffered model.

kqr5• 5 years ago

Unfortunately, large buffers lead to more spiky behaviour than well-kempt ones.

One of the reasons is they hide feedback about downstream capacity problems. (See "bufferbloat" for this in internet terms, Principles of Product Development Flow for it in terms of creative work, and any book on lean manufacturing for it in terms of repetitive work.

api• 5 years ago

I’m fond of the idea that efficiency can also be overfitting.

rossdavidh2• 5 years ago

Interesting analogy!

programmarchy• 5 years ago

This is a good point. Perhaps it was better for the problem to be revealed during this pandemic rather than something worse like a war.

missedthecue• 5 years ago

I'd rather have fragile efficiency over the long run than robust inefficiency to smooth over the rare events like covid.

I mean would we all like the base model Ford Focus to cost $45,000 simply so that they'd be available on the lot during a once in a century pandemic?

kqr5• 5 years ago

Also small-scale fragility makes for large-scale anti-fragility if the broken things are allowed to break.

coliveira• 5 years ago

In capitalism there is a very simple solution for shortages: price increases. People still haven't realized that the solution is just to increase prices until only enough people afford the products, so there won't be shortages anymore.

kibibyte• 5 years ago

This is exactly what's happening. Chips in high-demand have gotten very expensive. https://blog.flipperzero.one/manufacturing-and-shipping-upda...

engineer_223• 5 years ago

Few people consider a deflating economy a "solution".

ip262• 5 years ago

How is that a solution? What happens when the good in question is food?

nradov• 5 years ago

Toyota actually had a large buffer of chip inventory which allowed them to maintain production longer than most other auto manufacturers. But it wasn't enough and they're finally cutting production. There are limits to buffering.

gumby2• 5 years ago

the same things that make a system "efficient" also can often be viewed as making it fragile.

Apart from the Toyota approach, discussed, Dell pioneered a different system: they forced "SLA"s on suppliers for whom Dell was a major customer. This was back in the mail order build-to-order business of the 90s; I don't really know what Dell does these days.

It worked like this: Dell took a truckload of parts. They hit the loading dock; were (in the finance sense "received"); Dell accepted the invoice (to be paid 30 days later or whenever) and the goods appeared on their balance sheet. They used them in computers they built, sent out, and then charged the customer's credit card for, getting paid immediately. When they ran low on part P they called up the vendor and said "deliver us some more right away". What was "right away"? Why pretty much immediately; the vendor had them in a truck outside Dell's facility. If they didn't, well, they stopped being Dell's vendor.

Pretty clever: the contents of those trucks were still on the vendor's balance sheet until Dell asked for them; Dell got to use them and get revenue for them long before they needed to be paid for, but basically not before they were needed. They made so much money on the float, and all at their vendors' expense.

They did the opposite too: if they had inventory ready to go but without a customer (prebuilt configs) they put it in trucks and drove the trucks away from the docs. I don't know how they got their auditors to accept it as GAAP but they did and were lauded by Business Week, the WSJ etc for their cleverness.

bestham3• 5 years ago

While impressive, this is only sustainable in a non-sustainable world. The burden that Dell unnecessary put on their suppliers have to be absorbed by the economy at some point. The single most important point that Toyota makes is stressing the importance of supply chain wide sustainability. Eg. by paying your suppliers ASAP and shortening credit lines, you should be able to get the parts cheaper than what you make of the interest.

dragonwriter2• 5 years ago

"Just-in-time" means "no buffer".

No, that's a degenerate fragile microoptimization inspired by seeing the short-term cost savings of just-in-time and going all in on those savings without understanding just-in-time.

What “just-in-time” actually means is dynamically exactly enough buffering as is cost effective given current expectations of forward conditions considering the likelihood of supply irregularities, cost of production interruption, costs of inventory, etc.

sixdimensional• 5 years ago

Yeah, the original comment is way off. I worked for a major electronics manufacturing company helping with demand driven MRP (DDMRP, MRP=material requirements planning) and obsolescence (DMSMS - diminishing manufacturing sources and material shortages).

I can definitively confirm that just-in-time is about trying to optimize the amount and strategic positioning of buffer needed to support the "right amount of production" to meet anticipated and actual demand, exactly as you describe.

Now, doing that can be rather difficult in the case of black swan events. But the goal is as you describe.

jjk1664• 5 years ago

dynamically exactly enough buffering as is cost effective given current expectations of forward conditions considering the likelihood of supply irregularities, cost of production interruption, costs of inventory, etc.

"Exactly enough" means "no buffer". You are simply mislabelling inventory as buffer. What people needed was buffer beyond what is cost effective given current expectations because something unexpected happened causing improbable supply irregularities.

drawkbox• 5 years ago

Very little margin and too much optimization/efficiency is bad for resilience. Couple that with private equity backed near entire market leverage monopolies/duopolies/oligopolies that control necessary supply and you have trouble.

HBS is even realizing too much optimization/efficiency is a bad thing. The slack/margin is squeezed out and with that, an ability to change vectors quickly. It is the large company/startup agility difference with the added weight of physical/expensive manufacturing.

The High Price of Efficiency, Our Obsession with Efficiency Is Destroying Our Resilience [1]

Superefficient businesses create the potential for social disorder.
A superefficient dominant model elevates the risk of catastrophic failure.
*If a system is highly efficient, odds are that efficient players will game it.*

Over efficiency and supply chain concentration single point(s) of failure (China/Asia with chips especially across Hong Kong and Taiwan that make most of the chips) caused supply chain disruptions, some hoarding is also going on with chips. [2]

The HBA MBA-itis and Chicago style thinking of excessive efficiency made the players that can compete larger and less of them, that takes away resilience and leads the market to gaming. The market has thus been gamed as the players that control it are more powerful in terms of market leverage. When you give up diversification and flexibility you get leverage and added weight to any needed quick changes as the large players attempt to control the market. [3]

US is now building up silicon supply chains again [4][5], it was much bigger in the 90s/early 00s with Intel/Motorola/etc additionally, but business leaders allowed a concentration to happen and it led to market leverage.

Hopefully that same mistake is not made in the future. It will take time to build up diversification of market leverage in terms of chips for availability.

This chip shortage, and all the supply chain problems during the pandemic as well, will hopefully introduce more wisdom and knowledge into business institutions that just because things are ok while being overly super efficient, that is almost a bigger risk than higher prices/costs. Competition is a leverage reducer. Margin is a softer ride even if the profit margins aren't as big.

[1] https://hbr.org/2019/01/the-high-price-of-efficiency

[2] https://finance.yahoo.com/news/china-stockpiles-chips-chip-m...

[3] https://www.bloomberg.com/news/articles/2019-12-03/china-sto...

[4] https://www.cnbc.com/2021/03/23/intel-is-spending-20-billion...

[5] https://www.cnbc.com/2020/05/15/tsmc-to-build-us-chip-factor...

m463• 5 years ago

not only is there a shock to the system, every (sub)system has had shocks.

I was talking to someone who was rebuilding a home, and the price of plywood went from $8/sheet to > $100/sheet

Another person said that the company that makes 75% of the electrical panels had stopped production.

those are just two pieces of the bigger puzzle, but since many if not all pieces have similar shocks, it would really surprise me if capacity could ever increase to meet demand.

TedShiller3• 5 years ago

It is alarming that people don’t understand that this is just another way to say inflation. The government prefers to call it a shortage.

qaq• 5 years ago

Scary part same applies to clouds. People spend a ton of effort making things multi-region and multi-cloud yet there is not enouph spare capacity to absorbs AWS US East going out

tharne3• 5 years ago

Fun fact, in the early days of lean manufacturing (of which "just in time" is a part), the practitioners often referred to it as the "fragile production system" for precisely the reasons you mention here. So yes, lean manufacturing is brutally efficient, but incredibly fragile.

PontifexMinimus2• 5 years ago

"Just-in-time" means "no buffer". We have, for decades, been doing as much as possible to make all our economic systems as efficient as possible, which is to say with no extra capacity.

This is true, but I don't see an antidote. The government couldn't just tell businesses to "be inefficient"!

rolph• 5 years ago

here is a basic treatment of the topic of semiconductor fabrication:

https://en.wikipedia.org/wiki/Semiconductor_device_fabricati...

this extends to CMOS VLSI fabrication.

silicon wafers are required as general fodder, as copper clad pc board is to discrete analog production.

https://en.wikipedia.org/wiki/Wafer_(electronics)#Production

the wafers require pulled ingots of silicon, these must be extremly pure and of extremely regular crystal latticing

https://en.wikipedia.org/wiki/Boule_(crystal)

flyinglizard4• 5 years ago

If you check the inventory of a company like TI, it seems as if their manufacturing went offline overnight. You can not find TI parts anymore on Digikey. Same for ST. This is unthinkable. Only some companies that are a bit more specialized and upmarket like Analog Devices still have some stuff left.

I wonder what would be the long lasting effect for these companies where entire products will get redesigned around what's available - many times these product designs live for 5-10 years. How many companies had to get TI parts out of their products? How's that going to affect TI revenue in few years time?

etaioinshrdlu• 5 years ago

Meh, there are thousands of microcontrollers from TI available, in stock, on digikey. https://www.digikey.com/en/products/filter/embedded-microcon...

Many of them have quantity thousands in stock. Especially the MSP430 line.

Granted, maybe the chips you need are not available, but you're exaggerating a bit.

flyinglizard4• 5 years ago

TI PMICs, about 1800 parts in stock, out of 3700 “normally stocking”.

TI temperature sensors, 300 in stock out of 600 normally stocking.

It’s the often used parts that go first.

But let’s put TI aside for a second: search STM32, there are 45 parts out of 1571 normally stocking (!).

grycefispies• 5 years ago

I find it fascinating that through all this, rarely if ever is it mentioned through traditional media channels that the reason in large part for all of this might just be because of our over-reliance on China and other countries when it comes to manufacturing.

How beautiful would it be if chips, and many other things, were built here in the US? In addition to the myriad of obvious benefits, another would be not having to wait over a month or more between a chip “rolling off the line” and finally making the month or more long trip from overseas.

Sure, most news articles regarding this issue will mention offshore production in passing - its impossible not to. But very few if any are actually making that a focal point of the article.

throwaway2048• 5 years ago

china does not, and never has made the vast majority of ICs

fuzzfactor2• 5 years ago

OTOH, when US chipmaking moved overseas, Taiwan was the only China that could be considered.

neonate• 5 years ago

http://web.archive.org/web/20210902153602/https://www.bloomb...

tus89• 5 years ago

We are making more. Lots more. But we are buying even more than that.

Its called demand > supply.

amelius2• 5 years ago

That's too simple. E.g. why aren't the prices increasing such that the buying stops?

forty2• 5 years ago

Maybe the buyers don't have suddenly more money to spend.

Gigachad10• 5 years ago

With enough time I assume they will. People will get upset if they suddenly see stores selling the same product for double the price. So the stores take the loss (or really just not taking the potential profit) and then let scalpers resell them at market value while offloading all of the hate on to faceless ebay sellers.

adenverd• 5 years ago

AFAICT they are. You can't find a GTX 3060, 3070, or 3080 for less than 4x MSRP right now.

azinman22• 5 years ago

I’ve always wondered, why are silicon wafers a circle when you’re stamping out rectangles from it? It seems so wasteful. I’m sure there’s got to be a reason…

AlotOfReading• 5 years ago

That's how the crystal grows when they form the ingot. You could square them up, but that's extra processing steps and wastes area.

BenoitEssiambre• 5 years ago

Because before it's a wafer, it's a big sausage of monocrystalline silicon: https://en.wikipedia.org/wiki/Czochralski_method

Isamu• 5 years ago

The silicon is grown in a process that produces long cylinders that are then sliced into wafers. Silicon is not molded, cast or extruded, so the shape is result of the growing process.

https://en.m.wikipedia.org/wiki/Czochralski_method

Chyzwar• 5 years ago

https://www.sas-globalwafers.co.jp/eng/products/wafer/proces...

nullc2• 5 years ago

If you make a product with low margins it is much better for you to under-produce rather than over-produce.

I suspect this makes it somewhat hard to restart the economy as there isn't any surplus of a lot of materials. And since downstream consumers are blocked, they fail to generate the demand needed to justify bringing up production.

mmmBacon• 5 years ago

Semiconductor companies traditionally operate at high gross margins close similar to software companies.

https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...

nullc2• 5 years ago

good point, though not necessarily true for the upstream outputs they consume!

glanard_frugner• 5 years ago

chip shortage is due to smic sanctions, no one seems to want to talk about this

SimeVidas• 5 years ago

Chip manufacturers: Everything is a mess, all we can make are these decade-old, super outdated chips.

Nintendo: Perfect, give me all of them.

Gigachad10• 5 years ago

Those old and cheap chips seem to be hit the hardest. I can easily buy an M1 macbook today but buying a washing machine or a basic microcontroller is sold out for an undetermined time.

drdd• 5 years ago

no surprise if apple chips advance and take over US market by 2024

skohan3• 5 years ago

they would need fabs to do anything about the shortage

Animats4• 5 years ago

What worries me is that a shortage economy could become the new normal. If you're selling 100% of production and can't fill all the orders, profits are great. What kept companies from running in that mode was fear of competition. If the "free market" no longer generates new entrants, why expand and risk overcapacity and losses?

farmerstan• 5 years ago

It means that inflation is going to continue. You raise prices to abate demand

uDontKnowMe• 5 years ago

Why wouldn't companies raise their prices to match demand in the long term?

LeoPanthera• 5 years ago

Basic supply and demand economics. Low supply means high prices but it also means low unit sales, and this is rarely the most profitable state. Once supply recovers, and it will recover, supply will increase.

Hey, this "supply and demand" curve picture on Wikipedia is tiny, anyone got a freely licensed higher resolution one they can upload?

https://en.wikipedia.org/wiki/File:Fig5_Supply_and_demand_cu...

ComputerGuru2• 5 years ago

Free money throws a wrench in that because you’ll have parties willing to spend drastically more than a product is worth (be it due to some combination of one or more of free government money, lack of common sense, or obscene wealth) giving suppliers an opportunity to raise prices beyond what they normally could to compensate for the lost profit margins due to low unit sales.

It’s a wacky world out there right now.

swiley• 5 years ago

The word your looking for is “inflation.”

trainsplanes• 5 years ago

More motivation for another company to swoop in and completely crush your business by offering stable supply.

If China goes hard on chip manufacturing, they could economically crush Taiwan.

TedShiller3• 5 years ago

It’s not a shortage it’s called inflation

fortran772• 5 years ago

We've been unable to get USRPs -- and we need a few dozen for a project. We're starting to look at chinese "clone" versions to see if they're any good. National Instruments has no idea when they can ship again, and no supplier has any:

(See Newark, for example)

https://www.newark.com/search/prl/results?st=usrp&sort=P_PRI...

sneak2• 5 years ago

There seem to be a fair number of secondhand ones on eBay.

fortran772• 5 years ago

The fact that the counterfeits exist make it difficult to buy reliably on eBay.

pcurve• 5 years ago

Key takeaway

"factories are more advanced and cost over $20 billion each."

"Once you spend all that money building giant facilities, they become obsolete in five years or less. To avoid losing money, chipmakers must generate $3 billion in profit from each plan"

mensetmanusman• 5 years ago

This winter will be interesting when furnaces break and there is no way to repair them.

twarge• 5 years ago

Anecdotally, I find that parts that used to be in stock are simply bought up en masse by speculators, and then are resold at a huge markup. So you will routinely find that all the authorized distributors are zeroed out and all the unauthorized distributors are selling for 2x-100x the price.

I'm not sure when this became a thing, but it's very real to me. It's a snowball effect; these folks get better and better at buying everything up, and then get all the capital to continue and expand the process. I have stock notifications everywhere and everything is gone as soon as it is posted.

Regarding the article - it is definitely not all about fancy fabs that can't be built - these are analog and power parts! And microcontroller fabs are fancier, but usually many many nodes behind state of the art. Maybe it is a capital thing, but every fab I've ever encountered is more than busy. Sure, you lose money trying to do the hardest thing and failing, but the problem is so widespread across so many non-edge products that it must be explained by other factors.

topspin• 5 years ago

"it must be explained by other factors"

It's consolidation of manufacturing. Many products and product lines have exactly 1 manufacturer today. No competition. No reason not to just run existing fabs, forego investing in more capacity and make bank while prices skyrocket.

nanis• 5 years ago

For the same reasons that the Soviet Union could not keep grocery stores stocked most of the time.

Gigachad10• 5 years ago

Because farms cost $18 billion dollars each and become obsolete in less than 5 years?

m0llusk• 5 years ago

Who is "we", Kimosabe?

quickthrower23• 5 years ago

This explains the shortage in very fast chips, but why do cars etc. have a chip shortage? Cant they use slower chips with fewer transistors that hopefully can be manufactured more easily by more companies?

samhain2• 5 years ago

Cars already use larger slower lithography sizes, which are more resilient to temperature changes, but also can be lower margin profit, since they take up more space on a standard silicon wafer. Older fabs, when spun down, may not just sit there, and may have their hardware cannibalized or at least the space repurposed for something profitable. So the old machines usually can’t just be turned on. There’s also a people-problem where that specific equipment may be understood by a select group of people and they may not be available.

There are also problems surrounding qualifications of parts and the supply chain restrictions that suppliers are held to by manufactures. So, trying to replace even just one part on a design that is locked down can be quite painful for a company. We are having many types of parts shortages at this time though, which exacerbates that experience.

Even so, a much “slower part” usually won’t have the same feature set, and may not have the same memory peripherals pinned out, requiring further qualification. Hardware changes of that level are usually done 2-3 years in advance for all of the paperwork and qualification steps. You’d have to build today-cars with standardized qualified parts from years ago. An outrageous example might be trying to stick a cassette-tape head-unit in your latest 2022 car.

de_nied• 5 years ago

On a related note, ETH 2.0 is coming around the corner, which is going to result in a flood of used GPUs to the market (hopefully driving prices down). This will happen sometime in the next two years I believe.

tmellon2• 5 years ago

Many consumers fuel this demand by sheer convenience. I personally know of many PC users who order a new laptop/machine, when all they require is a SSD upgrade to their hard-drive. Unfortunately they are not tech-savvy to do a reinstall of the OS. For them it is simply more convenient to order a newer machine. In some extreme cases, all they need is an external drive to store their data and to physically wipe down of their computer to remove the dirt/crumbs/grime from 2 years of usage.

yogrish• 5 years ago

If any one is interested to knwo how complex the chio making process is and why it is not so easy to set up a plant. https://youtu.be/CkNn98WE5_k

justbored123• 5 years ago

It would be nice to see some serious study that could tell us how much of it is

1. Disruption of supply chains

2. Money printing for Covid stimulus giving additional spending power to consumers increasing demand above the average.

3. Money printing for Covid stimulus reducing demand for low paying jobs.

4. Scalpers.

5. Speculation on the part of manufacturers that prefer to increase prices instead of investing long term to expand production.

6. Other.

Aeolun3• 5 years ago

So we can just make more. We simply have to spend a prohibitive amount of money and some time that’s longer than the current election cycle.

fuzzfactor2• 5 years ago

Why can't we just do without and re-issue some 1966 Mustangs and Broncos for a while?

1959 Corvettes and Cadillacs wouldn't be bad either.

Even a 1965 Beetle when they still had a flat windshield. They would fly off the shelf.

TedShiller3• 5 years ago

There is no shortage if you pay enough.

This is also known as inflation.

csense• 5 years ago

Okay, so you need a $20 billion factory to put out 256-core behemoths that power servers with terabytes of RAM.

But if you're GM, you don't need the latest Xeon. You need a 100 MHz single-core microcontroller, that normally sells for $2 to a hobbyist ordering a single chip, but probably something like $0.50 if you're GM and you order a million.

GM would probably happily pay $20 for that microcontroller if it's holding up a $40,000 truck.

If those microcontrollers cost 0.1% of what a Xeon costs, shouldn't that mean, to a first order of magnitude, the factory that produces a 100 MHz microcontroller should cost 0.1% of what the factory costs to produce a Xeon?

How slow / expensive would it be if you wanted to set up a factory to pump out microcontrollers for GM trucks instead of Xeons for Amazon servers?

The chip shortage keeps getting worse – why can't we just make more?

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