Expensive Tech Stats

Since this was for 2021 expect some whiplash.

NYT email

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Some relevant stats from 2021:

More than one of every four smartphones sold globally last year were higher-priced devices, the largest ever share for those top-tier phones, according to Counterpoint Research.

Total U.S. sales of laptop computers cooled off after the bonkers sales in 2020, when Americans stocked up on gear for remote school and work. But sales of laptops that cost at least $1,000 increased 15 percent in a year, the research firm NPD Group told me.

Sales of TVs also fell last year from a pandemic-fueled craze in 2020, but NPD said that sales of $1,000-and-up televisions climbed 47 percent.

Americans are buying more larger, higher-priced vehicles and fewer economy cars, helping to raise the average cost of new vehicles to records nearly every month.

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More than one of every four smartphones sold globally last year were higher-priced devices, the largest ever share for those top-tier phones

Not a surprise. Major movement from 4G to 5G network phones. Plus, with the end of 3G, ALL those devices (not just phones) had to move to 4G/5G simply to be able to continue to service to existing customers.

Americans are buying more larger, higher-priced vehicles and fewer economy cars

Again, no surprise. With the auto chip shortage, the auto companies chose to build the larger, more profitable vehicles (especially pickups with mega-margins) with lots of included amenities, plus sometimes temporarily discontinued making less expensive models.

Watch what happens when the chip shortage goes away.

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Watch what happens when the chip shortage goes away.

Jerry,

I am getting old but two weeks ago I linked possibly NVDA’s CEO saying the chip shortage would be with us another two years. It is not going away. I think it was that CEO.

No it was ASML’s CEO saying no end insight for the next two years to the chip shortage.

Not all chip shortages are the same. Nvidia is going to use the latest, greatest process nodes for their chips. Automakers use old technology that can only be made on older fabs (your car does not need the smallest transistors, and those chips are far cheaper as a result). Any new fab built will be newer technologies, period. Nobody is going to make a new fab to build automotive chips. This is how things can improve for some but not for others.

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Any new fab built will be newer technologies, period. Nobody is going to make a new fab to build automotive chips.

Correct, but there is the “roll down” effect. As new chips are made using new tech, the older tech gets bumped down to making older, non-current chips. Many of those older chips “go away” because they are no longer needed. So that eqpt can be used to make chips that are in demand. With contract in hand, the fab does not care what they produce. Just that the contract is profitable–and preferably long term.

Currently, there is not sufficient capacity to meet all demands for chips–which was created by the worldwide slowdown as a result of Covid. Car companies chose to abandon their existing chip supplier contracts because they could not predict if and when demand would restart. Car rental companies cut orders for new cars–which buy large volumes of new vehicles every year (at discounted prices)–and many had “fire sales” to get rid of excess vehicle inventory.

With cancelled auto manufacturer contracts, the portion of the chip foundries servicing that market found and signed contracts with new buyers of the chips they could produce. When the auto industry suddenly popped up and yelled “WE WANT CHIPS”, it was too late. The available chip capacity had mostly been contracted out to other buyers, so the auto industry was in a problem of its own creation.

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Correct, but there is the “roll down” effect. As new chips are made using new tech, the older tech gets bumped down to making older, non-current chips.

Sure. But that doesn’t help the car guys today. There is not enough capacity on the older process nodes to supply the car guys. This problem does not go away by building new fabs. New fabs will be for a new process node. The only recourse is for the car guys to port their chips to a newer node that DOES have capacity. All other options are too expensive.

In the end, either car guys port, or the people who took their capacity port.

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Hit send too soon. You cannot easily or cheaply take a fab on one process node and make it build chips on a much older node. Too much machinery and tooling that will need to be replaced.

So yes. You build new fabs. Does not mean the older fab (maybe running a three year old process node) can now run a 10 year old process. Not cheaply. So that requires redoing the design of the chip itself. Timing, clocking, power consumption, etc. designs do not just port.

bj,

Intel is building a new fab for auto semis. There has been a shortage of those chips as well. I forget which state or country is getting that fab, might be Ireland.

Friend at intel says all their new fabs will be newer nodes like 4nm and below. So I doubt what you are saying is true.

In the end, either car guys port, or the people who took their capacity port.

A third option exists. Other chips currently made on the older eqpt become not needed due to external factors. That will naturally happen–but when? Good question.

Choices are simple if they want to control their chip supply:

  1. Car companies set up their own chip production.

  2. Car companies buy chip producer(s) and control production, selling excess capacity if spare production capacity exists.

>>Americans are buying more larger, higher-priced vehicles and fewer economy cars, helping to raise the average cost of new vehicles to records nearly every month. <<

Again, no surprise. With the auto chip shortage, the auto companies chose to build the larger, more profitable vehicles (especially pickups with mega-margins) with lots of included amenities, plus sometimes temporarily discontinued making less expensive models.

The dropping of lower priced models is permanent, management hopes, and predated the plague. Chevy Sonic and Cruze gone, Spark going this summer. Ford Focus and Fiesta gone, Ecosport going. Honda Fit gone. VW Golf gone. On top of that, they are only producing the most expensive variants of the remaining models. ATP is now about $47,000.

Steve

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Choices are simple if they want to control their chip supply:

1. Car companies set up their own chip production.

2. Car companies buy chip producer(s) and control production, selling excess capacity if spare production capacity exists.

This isn’t going to happen. The car makers don’t have the expertise to make operate a fab and make chips. Heck, they seem to barely know how to switch from gas to EV given how a tiny startup has passed them all in market cap and sales of EVs.

The solution is to re-design chips to use newer process nodes and reserve fab capacity for them. This will cost more, but cheaper than making cars missing some parts and putting them in a parking lot…or not making cars that could be sold.

The other part of the problem is the 2nd and 3rd tier suppliers were often the ones making parts that use these now-hard-to-get chips and were competing on price and sometimes making the same chips for multiple OEMs in the same or slightly different assemblies. The car makers weren’t really paying attention to this it seems. Now they are.

Mike

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In the end, either car guys port, or the people who took their capacity port.

You have to be nimble, not an incumbent ICE carmaker’s trait. At Tesla they quickly adopted new chips and rewrote the software. AGILE to the rescue! Even so Tesla had to reduce their use, for example, they removed some features of passenger seats.

The Captain

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The dropping of lower priced models is permanent, management hopes, and predated the plague.

If people have freshly minted cash why not sell them rope? I mean cars!

TARP, easing, negative rates, etc., etc., etc. predated the plague, courtesy of the Financial Industrial Complex (FIC) aided and abetted by the Fed which happens to be the property of the Wall Street bank cartel, a major component of the FIC. Circular? Feedback?

The Captain

Car companies set up their own chip production.

Semiconductors have been going fabless for decades now, with precious few exceptions, and yet you think a car company will be willing to invest in and run a fab???

No. No. No. This is a recipe to bankrupt a car company, not save it.

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Sorry - mistyped:

Semiconductor companies have been going fabless for decades now

The car makers don’t have the expertise to make operate a fab and make chips.

They do not have to have the expertise in anything–just as the executives do not really have a clue about engineering, fluid dynamics, rolling resistance, etc. What they DO have to do is be able to find and hire the people who DO have that knowledge and expertise. The fab (if needed) would be a one-time purchase/expense with a 20-30 year life. If they can contract with an existing fab, then the expertise comes with the existing facility and the contract. The key point is an essential one: The car company controls the availability of essential components, not an outside source.

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The fab (if needed) would be a one-time purchase/expense with a 20-30 year life. If they can contract with an existing fab, then the expertise comes with the existing facility and the contract.

lol.

20 or 30 years ago there were probably a couple of dozen companies operating fabs. A handful are left and only 3 that are competing at the latest process technology. Operating a fab isn’t a simple one-time purchase…every few years they are updated or sold off as outdated to low margin production.
The semi business, in general, has always been very cyclical with over capacity and low prices followed by under capacity and high prices.
One of the other problems that car makers have is they need a wide variety of chips that need different processes. A profitably run fab isn’t going to make this kind of variety.

Mike

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Operating a fab isn’t a simple one-time purchase…every few years they are updated or sold off as outdated to low margin production.

For the car companies, it would be. Why? Because most of what they need is part of a limited number of older technologies. So the only upgrades would be to maintain that level of technology without trying to go to a different level. Been there, seen the results. It wasn’t pretty.