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A surge in demand for artificial intelligence-focused semiconductors and AI-enabled smartphones and laptops could lead to the next global chip shortage, according to a report released Wednesday by consultancy Bain & Company.
The last major semiconductor shortage occurred during the Covid-19 pandemic amid supply chain disruptions and increased demand for consumer electronics as people were forced to stay and work from home.
The technology giant has been snapping up the graphics processing unit, or GPU, especially from Nvidia. These GPUs located in data centers are essential for training large AI models that support applications like OpenAI’s ChatGPT.
Meanwhile, companies like Qualcomm designing chips that go into smartphones and personal computers and allow those devices to run AI applications locally rather than over an internet connection in the cloud. This is often referred to as an AI-enabled device and the company from Samsung to Microsoft has released that product.
Bain said demand for GPUs and AI consumer electronics could be the cause of the chip shortage.
“Surging demand for graphics processing units (GPUs) has led to shortages in certain elements of the semiconductor value chain,” Anne Hoecker, head of the Americas technology practice at Bain & Company, told CNBC via email.
“If we combine the growth in demand for GPUs along with the wave of AI-enabled devices, which can accelerate the refresh cycle of PC products, there may be other obstacles spread in the semiconductor supply.”
However, it is currently unclear how much demand there will be for these AI-powered gadgets, as it appears to be a cautious approach from consumers so far.
Bain & Company notes that the semiconductor supply chain is “incredibly complex, and an increase in demand of about 20% or more has a high probability of upsetting the balance and causing chip shortages.”
“The explosion of AI in meeting large end markets could easily exceed these thresholds, creating vulnerable chokepoints throughout the supply chain,” the report added.
The semiconductor supply chain spans many companies. For example, while Nvidia can design GPUs, they are made by Taiwan Semiconductor Manufacturing Co., or TSMCin Taiwan. TSMC relies on chip-making tools from countries around the world, such as the Netherlands. Furthermore, the most advanced chips can only be made on a large scale by TSMC and Samsung Electronics.
Geopolitics can also be a factor in chip shortages. Semiconductors are seen by governments around the world as a strategic technology. The US has campaigned, through export restrictions and other sanctions, to try to limit China’s access to the most advanced chips. Meanwhile, Washington has been working on its own domestic capacity to produce semiconductors.
“Geopolitical tensions, trade restrictions, and multinational technology companies
The supply chain from China continues to pose a serious risk to semiconductor supply. Delays in plant construction, material shortages, and other unpredictable factors can also create pinch points,” Bain & Company said.
