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The great chip crisis threatens the promise of Moore’s Law

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The great chip crisis threatens the promise of Moore’s Law


Even as microchips have become essential in so many products, their development and manufacturing have come to be dominated by a small number of producers with limited capacity—and appetite—for churning out the commodity chips that are a staple for today’s technologies. And because making chips requires hundreds of manufacturing steps and months of production time, the semiconductor industry cannot quickly pivot to satisfy the pandemic-fueled surge in demand. 

After decades of fretting about how we will carve out features as small as a few nanometers on silicon wafers, the spirit of Moore’s Law—the expectation that cheap, powerful chips will be readily available—is now being threatened by something far more mundane: inflexible supply chains. 

A lonely frontier

Twenty years ago, the world had 25 manufacturers making leading-edge chips. Today, only Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan, Intel in the United States, and Samsung in South Korea have the facilities, or fabs, that produce the most advanced chips. And Intel, long a technology leader, is struggling to keep up, having repeatedly missed deadlines for producing its latest generations. 

One reason for the consolidation is that building a facility to make the most advanced chips costs between $5 billion and $20 billion. These fabs make chips with features as small as a few nanometers; in industry jargon they’re called 5-nanometer and 7-nanometer nodes. Much of the cost of new fabs goes toward buying the latest equipment, such as a tool called an extreme ultraviolet lithography (EUV) machine that costs more than $100 million. Made solely by ASML in the Netherlands, EUV machines are used to etch detailed circuit patterns with nanometer-size features.

Chipmakers have been working on EUV technology for more than two decades. After billions of dollars of investment, EUV machines were first used in commercial chip production in 2018. “That tool is 20 years late, 10x over budget, because it’s amazing,” says David Kanter, executive director of an open engineering consortium focused on machine learning. “It’s almost magical that it even works. It’s totally like science fiction.”

Such gargantuan effort made it possible to create the billions of tiny transistors in Apple’s M1 chip, which was made by TSMC; it’s among the first generation of leading-edge chips to rely fully on EUV. 

Only the largest tech companies are willing to pay hundreds of millions of dollars to design a chip for leading-edge nodes.

Paying for the best chips makes sense for Apple because these chips go into the latest MacBook and iPhone models, which sell by the millions at luxury-brand prices. “The only company that is actually using EUV in high volume is Apple, and they sell $1,000 smartphones for which they have insane margin,” Kanter says.

Not only are the fabs for manufacturing such chips expensive, but the cost of designing the immensely complex circuits is now beyond the reach of many companies. In addition to Apple, only the largest tech companies that require the highest computing performance, such as Qualcomm, AMD, and Nvidia, are willing to pay hundreds of millions of dollars to design a chip for leading–edge nodes, says Sri Samavedam, senior vice president of CMOS technologies at Imec, an international research institute based in Leuven, Belgium. 

Many more companies are producing laptops, TVs, and cars that use chips made with older technologies, and a spike in demand for these is at the heart of the current chip shortage. Simply put, a majority of chip customers can’t afford—or don’t want to pay for—the latest chips; a typical car today uses dozens of microchips, while an electric vehicle uses many more. It quickly adds up. Instead, makers of things like cars have stuck with chips made using older technologies.

What’s more, many of today’s most popular electronics simply don’t require leading-edge chips. “It doesn’t make sense to put, for example, an A14 [iPhone and iPad] chip in every single computer that we have in the world,” says Hassan Khan, a former doctoral researcher at Carnegie Mellon University who studied the public policy implications of the end of Moore’s Law and currently works at Apple. “You don’t need it in your smart thermometer at home, and you don’t need 15 of them in your car, because it’s very power hungry and it’s very expensive.”

The problem is that even as more users rely on older and cheaper chip technologies, the giants of the semiconductor industry have focused on building new leading-edge fabs. TSMC, Samsung, and Intel have all recently announced billions of dollars in investments for the latest manufacturing facilities. Yes, they’re expensive, but that’s where the profits are—and for the last 50 years, it has been where the future is. 

TSMC, the world’s largest contract manufacturer for chips, earned almost 60% of its 2020 revenue from making leading-edge chips with features 16 nanometers and smaller, including Apple’s M1 chip made with the 5-nanometer manufacturing process.

Making the problem worse is that “nobody is building semiconductor manufacturing equipment to support older technologies,” says Dale Ford, chief analyst at the Electronic Components Industry Association, a trade association based in Alpharetta, Georgia. “And so we’re kind of stuck between a rock and a hard spot here.”

Low-end chips

All this matters to users of technology not only because of the supply disruption it’s causing today, but also because it threatens the development of many potential innovations. In addition to being harder to come by, cheaper commodity chips are also becoming relatively more expensive, since each chip generation has required more costly equipment and facilities than the generations before. 

Some consumer products will simply demand more powerful chips. The buildout of faster 5G mobile networks and the rise of computing applications reliant on 5G speeds could compel investment in specialized chips designed for networking equipment that talks to dozens or hundreds of Internet-connected devices. Automotive features such as advanced driver-assistance systems and in-vehicle “infotainment” systems may also benefit from leading-edge chips, as evidenced by electric-vehicle maker Tesla’s reported partnerships with both TSMC and Samsung on chip development for future self-driving cars.

But buying the latest leading-edge chips or investing in specialized chip designs may not be practical for many companies when developing products for an “intelligence everywhere” future. Makers of consumer devices such as a Wi-Fi-enabled sous vide machine are unlikely to spend the money to develop specialized chips on their own for the sake of adding even fancier features, Kanter says. Instead, they will likely fall back on whatever chips made using older technologies can provide.

The majority of today’s chip customers make do with the cheaper commodity chips that represent a trade-off between cost and performance.

And lower-cost items such as clothing, he says, have “razor-thin margins” that leave little wiggle room for more expensive chips that would add a dollar—let alone $10 or $20—to each item’s price tag. That means the climbing price of computing power may prevent the development of clothing that could, for example, detect and respond to voice commands or changes in the weather.

The world can probably live without fancier sous vide machines, but the lack of ever cheaper and more powerful chips would come with a real cost: the end of an era of inventions fueled by Moore’s Law and its decades-old promise that increasingly affordable computation power will be available for the next innovation. 

The majority of today’s chip customers make do with the cheaper commodity chips that represent a trade-off between cost and performance. And it’s the supply of such commodity chips that appears far from adequate as the global demand for computing power grows. 

“It is still the case that semiconductor usage in vehicles is going up, semiconductor usage in your toaster oven and for all kinds of things is going up,” says Willy Shih, a professor of management practice at Harvard Business School. “So then the question is, where is the shortage going to hit next?”

A global concern

In early 2021, President Joe Biden signed an executive order mandating supply chain reviews for chips and threw his support behind a bipartisan push in Congress to approve at least $50 billion for semiconductor manufacturing and research. Biden also held two White House summits with leaders from the semiconductor and auto industries, including an April 12 meeting during which he prominently displayed a silicon wafer.

The actions won’t solve the imbalance between chip demand and supply anytime soon. But at the very least, experts say, today’s crisis represents an opportunity for the US government to try to finally fix the supply chain and reverse the overall slowdown in semiconductor innovation—and perhaps shore up the US’s capacity to make the badly needed chips.

An estimated 75% of all chip manufacturing capacity was based in East Asia as of 2019, with the US share sitting at approximately 13%. Taiwan’s TSMC alone has nearly 55% of the foundry market that handles consumer chip manufacturing orders.

Looming over everything is the US-China rivalry. China’s national champion firm SMIC has been building fabs that are still five or six years behind the cutting edge in chip technologies. But it’s possible that Chinese foundries could help meet the global demand for chips built on older nodes in the coming years.  “Given the state subsidies they receive, it’s possible Chinese foundries will be the lowest-cost manufacturers as they stand up fabs at the 22-nanometer and 14-nanometer nodes,” Khan says. “Chinese fabs may not be competitive at the frontier, but they could supply a growing portion of demand.”

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Donald ’67, SM ’69, and Glenda Mattes

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Donald ’67, SM ’69, and Glenda Mattes


Don Mattes started giving to the Picower Institute for Learning and Memory at MIT before he himself was diagnosed with Alzheimer’s disease. Since his death in 2020, his wife, Glenda, has carried forward Don’s passion for its work. “My wish is that no one ever has to go through the horrors of Alzheimer’s disease ever again,” Glenda says. The Matteses have also supported the Koch Institute for Integrative Cancer Research at MIT.

Legacy sparks hope. An early key employee of Andover Controls who later ran the company’s European operations, Don visited six continents with Glenda during their 30-year marriage—often to ski or bicycle. “Don’s was a life well lived, just too short,” Glenda says. The couple made provisions in their estate plan to support the Picower Institute. After Don died, Glenda made a gift to MIT of real estate that established both endowed and current-use funds there to support research on Alzheimer’s, dementia, and other neurodegenerative diseases. Glenda is a cancer survivor, and the gift also endowed a fund in the couple’s name at the Koch Institute.

Great discoveries being made at MIT: “Don always said the best thing he got from MIT was being taught how to think,” Glenda says. “MIT is an amazing place. Picower Institute director Li-Huei Tsai and her team are doing more than looking for a treatment for Alzheimer’s. They’re looking for the root cause of the disease. I am also fascinated with the Koch’s melding of engineering and biology. The chances they are going to solve the cancer issue someday are very high.” 

Help MIT build a better world.
For more information, contact Amy Goldman: (617) 253-4082;  goldmana@mit.edu. Or visit giving.mit.edu/planned-giving.

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Investing in women pays off

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Investing in women pays off


“Starting a business is a privilege,” says Burton O’Toole, who worked at various startups before launching and later selling AdMass, her own marketing technology company. The company gave her access to the HearstLab program in 2016, but she soon discovered that she preferred the investment aspect and became a vice president at HearstLab a year later. “To empower some of the smartest women to do what they love is great,” she says. But in addition to rooting for women, Burton O’Toole loves the work because it’s a great market opportunity. 

“Research shows female-led teams see two and a half times higher returns compared to male-led teams,” she says, adding that women and people of color tend to build more diverse teams and therefore benefit from varied viewpoints and perspectives. She also explains that companies with women on their founding teams are likely to get acquired or go public sooner. “Despite results like this, just 2.3% of venture capital funding goes to teams founded by women. It’s still amazing to me that more investors aren’t taking this data more seriously,” she says. 

Burton O’Toole—who earned a BS from Duke in 2007 before getting an MS and PhD from MIT, all in mechanical engineering—has been a “data nerd” since she can remember. In high school she wanted to become an actuary. “Ten years ago, I never could have imagined this work; I like the idea of doing something in 10 more years I couldn’t imagine now,” she says. 

When starting a business, Burton O’Toole says, “women tend to want all their ducks in a row before they act. They say, ‘I’ll do it when I get this promotion, have enough money, finish this project.’ But there’s only one good way. Make the jump.”

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Preparing for disasters, before it’s too late

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Preparing for disasters, before it’s too late


All too often, the work of developing global disaster and climate resiliency happens when disaster—such as a hurricane, earthquake, or tsunami—has already ravaged entire cities and torn communities apart. But Elizabeth Petheo, MBA ’14, says that recently her work has been focused on preparedness. 

It’s hard to get attention for preparedness efforts, explains Petheo, a principal at Miyamoto International, an engineering and disaster risk reduction consulting firm. “You can always get a lot of attention when there’s a disaster event, but at that point it’s too late,” she adds. 

Petheo leads the firm’s projects and partnerships in the Asia-Pacific region and advises globally on international development and humanitarian assistance. She also works on preparedness in the Asia-Pacific region with the United States Agency for International Development. 

“We’re doing programming on the engagement of the private sector in disaster risk management in Indonesia, which is a very disaster-prone country,” she says. “Smaller and medium-sized businesses are important contributors to job creation and economic development. When they go down, the impact on lives, livelihoods, and the community’s ability to respond and recover effectively is extreme. We work to strengthen their own understanding of their risk and that of their surrounding community, lead them through an action-planning process to build resilience, and link that with larger policy initiatives at the national level.”

Petheo came to MIT with international leadership experience, having managed high-profile global development and risk mitigation initiatives at the World Bank in Washington, DC, as well as with US government agencies and international organizations leading major global humanitarian responses and teams in Sri Lanka and Haiti. But she says her time at Sloan helped her become prepared for this next phase in her career. “Sloan was the experience that put all the pieces together,” she says.

Petheo has maintained strong connections with MIT. In 2018, she received the Margaret L.A. MacVicar ’65, ScD ’67, Award in recognition of her role starting and leading the MIT Sloan Club in Washington, DC, and her work as an inaugural member of the Graduate Alumni Council (GAC). She is also a member of the Friends of the MIT Priscilla King Gray Public Service Center.

“I believe deeply in the power and impact of the Institute’s work and people,” she says. “The moment I graduated, my thought process was, ‘How can I give back, and how can I continue to strengthen the experience of those who will come after me?’”

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