“It’s a bloody miracle,” said Jim Keller, an experienced chip designer whose résumé includes positions at Apple, Tesla and Intel and who now works for the AI chip start-up Tenstorrent. “Ten years ago you couldn’t do a hardware startup.”
The trends are not necessarily good news for chip customers, at least in the short term. The scarce supplies of many chips are driving manufacturers to scramble to ramp up production and worries in Washington about reliance on overseas suppliers. Additional demand could extend the bottlenecks, which are expected to continue until 2022.
Chipmakers’ earnings showed strong demand for the final quarter that ended in March. For example, sales at NXP Semiconductors, a major manufacturer of automotive, communications and industrial chips, rose 27 percent, despite two factories in Texas temporarily closed due to a cold snap.
The industry was notorious in the past for booms and busts usually caused by buying swings for certain products like PCs and smartphones. Global chip sales fell 12 percent in 2019, before recovering at 10 percent growth last year, according to estimates by research firm Gartner.
However, optimism is growing that cycles should ease as chips are now used in so many things. Philip Gallagher, managing director of major electronics retailer Avnet, gave examples such as sensors to track dairy cows, flow from beer taps and supply lines, and the temperature of products. And the number of chips in major products like cars and smartphones continues to rise, he and other executives say.
“This is a sustained cycle of growth, not a short spike,” said Kurt Sievers, CEO of NXP.
As a longtime industry observer, Handel Jones, head of the consulting firm International Business Strategies, total chip sales will steadily increase to $ 1.2 trillion by 2030 from around $ 500 billion this year.