The chip shortage explained with one analogy

People keep asking me to explain the chip shortage.

My friends. My family. My barber, who can’t get a new car because the dealership told him there’s a six-month wait. Everyone has noticed that things they want to buy are out of stock and nobody can tell them why.

So here’s my best attempt at a single analogy.

Imagine there are only three bakeries in the world. Not three bakeries per town. Three bakeries total. For the entire planet. One is in Taiwan (TSMC). One is in South Korea (Samsung). One is in the United States (GlobalFoundries, sort of, it’s complicated).

Everyone on Earth wants bread. Cars need bread. Phones need bread. Laptops need bread. Refrigerators, thermostats, hearing aids, game consoles, satellites. All of them need bread.

Now imagine that last year, a pandemic hit, and everyone suddenly started working from home and needed more bread than ever. At the same time, the car companies called and said “actually, we don’t need as much bread for a few months.” So the bakeries gave their oven time to phone companies and laptop companies instead.

Then the car companies came back and said “wait, we need bread again.” But the ovens were full. The waitlist was months long. And building a new oven takes three years and costs $20 billion.

And one of the two bakeries in Taiwan just had a drought, because the ovens need enormous amounts of water to run.

That’s the chip shortage.

There’s no quick fix. You can’t bake faster. You can’t build an oven overnight. You can’t substitute a different ingredient. Every device in the modern world is waiting in line at the same three bakeries, and the line wraps around the planet.

I wrote about this six months ago and said it would get worse. It got worse.

I think it’ll be another year before it gets better. Maybe two.

In the meantime, I’m going to stop trying to buy a GPU.

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