TSMC’s Chip Factory Might Arrive Too Late

If you’ve spent much time in the past twelve months trying to acquire electronic goods, you might have noticed that the process is a lot harder than it used to be. This is especially true if the electronic goods you’ve been trying to get your hands on are tablets, laptops, or video games consoles. That’s because there’s been a massive global shortage of chips and semiconductors. The shortage has been going on for more than twelve months, and it doesn’t look likely to end any time soon. That’s why TSMC recently announced it’s going to build a large new factory in Japan to alleviate the problem. By the time it’s finished, though, the world might have realised that it doesn’t need chips quite so much as it thought it did.

For those who haven’t heard the name before, TSMC is the largest chipmaker in the world. It can count almost every electronics manufacturer you can think of among its clients and also makes semiconductors for some of the world’s most popular cars. Despite the ongoing global shortage, the past twelve months have been very kind to TSMC. The lack of supply means that customers are willing to pay higher prices for TSMC’s wares, and so TSMC has recently told its investors that it foresees profit margins reaching and perhaps even exceeding fifty per cent soon and staying there for the long term. Before the company or anyone who owns shares in it starts popping champagne corks, though, there’s something it might not have considered.

The single biggest contributing factor to the chip shortage issue is the global pandemic of 2020. With territories around the world forced into lockdown, people found themselves stuck at home in their millions. Those people needed entertainment, and so they turned to electronics. That meant more demand for tablets, more demand for laptops and computers, and more demand for video games consoles. The market had never known demand like this before, and sales went through the roof. That should have been good news for anyone involved in the manufacture of any of those products or the parts that go into making them, but the good news came with a catch. Demand outstripped supply almost immediately. Existing stocks were quickly used up, and replacements couldn’t be made fast enough. As bullish as TSMC is, it predicts that production capacity issues will last for at least another twelve months. The new Japanese factory won’t be at full capacity until 2024. That gives people a lot of time to change their habits – and they might.

If you keep your ear to the ground, you’ll probably have heard about the difficulties people are experiencing in trying to buy the new Xbox and PlayStation consoles. They’re unavailable for the same reason other electronics aren’t available – lack of chips. People who want to buy them can’t buy them, but they’ll only tolerate that for so long. Right now,  they seem to be happy to keep on waiting. Six or twelve months from now, that might no longer be the case – especially if there are alternatives available. Unfortunately for Sony and Microsoft, viable alternatives now exist in services like Google Stadia and Amazon Luna.

The simple premise of the Amazon and Google platforms is that you don’t need a console to play brand new, high-spec video games. All you need is a reliable internet connection, a controller, and a device with a stream. Google and Amazon can then stream games to you in real-time from hardware that already exists. All you pay for is the game or a monthly subscription that entitles you to play any game of your choosing. As more game development companies make their products available on these new platforms, there’s less reason to pay $500 or more for a new console that takes six months to arrive. You play the same games on any device you want at the same level of performance, save that money, and not have to worry about when Sony might have enough chips to make more PlayStations.

The same is true of laptops. The main reason people buy new laptops is that they need better performance or because their existing machine has begun to slow down. That will be less of an issue in the future thanks to initiatives like Microsoft’s Windows 365 Cloud PC, which gives you access to your own personal PC via remote connection no matter where you are in the world, with all your files stored in the cloud. The fact the machine you’re using to access your cloud PC has an ageing processor no longer matters because you don’t need the processor to do anything complicated. All the processing happens in remote hardware, with the results streamed back to you. Again, you don’t need to wait for chips to become available to build new PCs because you no longer need one.

This revolution actually started more than ten years ago, and it began in an unlikely place. When the first casino company developed the first piece of code that eventually resulted in the creation of the first online slots website, they couldn’t have imagined they were starting a movement that could change everything in technology as we know it – and yet they were. The success of the first online slots websites demonstrated that people were happy to play slots from home and didn’t need a physical casino or a physical casino cabinet to play them in or with. Now, here in the 2020s, online slots websites are more popular than actual casinos almost everywhere in the world.  It will take longer for video game players and people who depend on their PCs for work to catch on to the idea, but they’ll get there.

The chip shortage is only an issue because people still think they need brand new electronic devices with chips in them. As soon as they realise that they don’t, it will become a non-issue. Imagine how quickly a shortage of DVDs would have ceased to be a problem when streaming first became popular. That’s the situation we’re now approaching with hardware. We’re prepared to take the next evolutionary step into the cloud and away from the confines of physical machinery. By the time that factory in Japan opens in 2024, it might find that it no longer has any customers to serve.

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