Semiconductor shortages aside, a chip arms race has been brewing in the background of the pandemic over the last few years. Even before the pandemic, large companies were already exploring their own custom fabrications to reduce costs and dependence on dominant chip suppliers.
For years, just a handful of chip companies have dominated most facets of the chip market, from the chips inside of your modems or wireless devices to graphics cards, mobile phones, gaming consoles, and any other modern gadget with a chip inside of it.
But, times are changing.
Apple, Amazon, Facebook, Google, Microsoft, Tesla, and a few other companies have begun producing their custom chips.
In November 2020, Apple announced its custom chip, the M1. After using Intel chips for years, this move was quite monumental. Google just announced new Pixel phones with a new custom-designed chip called Google Tensor.
TSMC and Samsung are two of the biggest beneficiaries of these custom chipsets — with TSMC being one of the biggest chip foundries in the world. It takes billions of dollars and upwards of a decade to create a foundry as TSMC has in Taiwan. An undertaking that not many companies can handle themselves.
The benefits of bespoke chips are they can be designed and tailored to the specific use-cases of the companies commissioning them, reduced power usage and a tailored set of features they can handle. Google has been focusing on artificial intelligence applications these past few years (this AI chip work resulted in Google Tensor)
The downside of companies like Apple and Google producing custom chipsets for their electronic devices is the ongoing semiconductor shortage. TSMC was rumoured to have prioritised Apple’s chip production (for obvious reasons), probably contributing to the chip shortages in other industries that rely on chips (like the automotive industry). TSMC accounts for around 50% of semiconductor manufacturing.
Although companies like Apple and Google are designing their own chips, they are not manufacturing them. The equipment required is expensive, the facilities required to house the equipment are expensive. I’ve seen estimates in the tens of billions to set up a foundry as TSMC has.
As a result of the pandemic, we will probably inevitably see Apple and Google invest in chip manufacturing facilities, which is not a bad thing. The worrying thing about TSMC which currently produces chips exclusively in Taiwan is the geopolitical crisis with its neighbour China. Any conflict would have disastrous consequences that would make the pandemic pale in comparison.
