A surge in demand for semiconductors designed to power artificial intelligence systems, alongside AI-enabled smartphones and laptops, could lead to the next global chip shortage, according to a recent report by Bain & Co. The report highlights the growing strain on the semiconductor industry as technology companies rapidly acquire graphics processing units (GPUs), crucial for training large AI models, particularly from manufacturers like Nvidia.
The last significant semiconductor shortage occurred during the Covid-19 pandemic, when disruptions in the supply chain coincided with an increase in demand for consumer electronics. The current rise in GPU demand, which plays a key role in AI development, is driving concerns about a similar supply imbalance. Anne Hoecker, head of Bain’s technology practice in the Americas, indicated that the combination of surging GPU demand with the rise of AI-enabled consumer devices could create widespread constraints across the semiconductor supply chain.
Companies such as Qualcomm are designing chips that power AI-enabled devices, including smartphones and personal computers, allowing these devices to run AI applications locally rather than relying on cloud computing. Major firms, including Samsung and Microsoft, have already begun to release products incorporating this technology. Bain warns that the rapid increase in demand for these AI-focused components may disrupt the equilibrium of the semiconductor market, which could cause shortages throughout the industry.
Hoecker emphasized the risks associated with a 20% or more increase in demand for semiconductors, explaining that this threshold could destabilize the supply chain, which is already highly complex. The Bain report further noted that AI’s rapid growth across various markets could create vulnerabilities, leading to critical chokepoints.
The semiconductor supply chain involves multiple players. While Nvidia designs GPUs, the manufacturing is done by Taiwan Semiconductor Manufacturing Co. (TSMC), which depends on tools and materials sourced globally. The most advanced chips are manufactured at scale only by companies like TSMC and Samsung, creating potential bottlenecks.
Geopolitical tensions also exacerbate the risks. Semiconductors are considered strategic technology by governments, and export restrictions from the U.S. have been limiting China’s access to the most advanced chips. Washington’s efforts to build domestic semiconductor production, combined with trade restrictions and supply chain shifts away from China, pose additional threats to global semiconductor supply.
According to Bain, other factors such as delays in factory construction and materials shortages could further complicate the situation, adding unpredictability to the already strained supply chain.
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