AI investment continues to drive chip shortage

It has echoes of the great supply chain crisis of 2020: Honda has postponed the reopening of a plant in China, and manufacturers of consumer electronics are warning of price increases.

That’s right. The semiconductor shortage is back. But the causes and effects are a bit different this time around.

If you’re a company producing anything that requires computer chips right now, “this is actually worse than what happened during COVID,” said Alvin Nguyen, a senior analyst at Forrester.

That’s because the pandemic shortage was fueled by a sudden demand from consumers for computers, said Nguyen. This time? It’s about the monumental investment in AI, which requires specialized chips.

“They’re in such demand, very few organizations can get them,” he said.

How bad the shortage gets and how long it lasts depends on a few factors, like domestic manufacturing and tariffs.

“The real big one is really the durability of the whole AI expansion,” said Renzo DeMeo, the head of the consulting firm RCD Advisors — that is, how long will the AI frenzy last?

Generally, though, DeMeo said that this is just how the chip industry is. There’s a regular ebb and flow of too much, then too little supply.

“Right now, there’s no end in sight,” he said.

Consumers are likely to first see price increases for TVs, smartphones, and computers, DeMeo added.