Reduced silicon output in China is leading to increased chip production costs

nanoguy

Posts: 1,018   +14
Staff member
Why it matters: Silicon makes up around 28 percent of the Earth's crust by weight, making it the second-most abundant material on the planet. However, the ongoing energy crunch in China has had a huge impact on the production of high-purity silicon, sending prices through the roof in the span of just two months. This further compounds the negative effects of other material and component shortages and is similarly expected to lead to higher prices for a wide variety of consumer and industrial products.

Over the past few months, we've seen a rapid deterioration of the tech supply chain, which started with a shortage of chips and culminated with booming prices for rare earth metals and various passive electronic components. Last month, chipmakers and electronics manufacturers complained of an acute lack of skilled workers that's threatening to prolong the current situation until well into 2022, which is a sentiment shared across pretty much all industry players.

If that wasn't enough, there's a new problem looming over chipmakers -- silicon, which is crucial for making everything from $1 display driver chips and microcontrollers to wafer-scale engines for machine learning, is now three times more expensive than it was a mere two months ago.

Image: Two engineers measuring a silicon ingot | Thor Nielsen

It may seem unbelievable that the world's second-most abundant element could ever become scarce, but China recently embarked on an energy crunch to reduce air pollution ahead of the upcoming Winter Olympics and boost reserves of coal and natural gas in expectation of higher energy demand during the winter months.

Production of high-purity silicon was greatly reduced as a result of the energy restrictions, to the point where some companies outside of China have had to halt their operations until they can secure a stable supply. It's expected that glass, solar panel, and car makers will see the rippling effects of this in the coming months, and manufacturers of silicone-based products are already feeling the hit on their business.

To get an idea of the severity of this issue, for the past two decades, the price of silicon has mostly hovered in the 8,000 to 17,000 yuan ($1,200 to $2,600) range per ton. Now that Chinese silicon suppliers in the Yunnan province have reduced their output by 90 percent compared to August levels, the prices have surged to as high as 67,300 yuan ($9,880) per ton.

Industry insiders believe silicon prices will remain high until at least mid-2022, when production will ramp up again. In the meantime, some manufacturers will be able to absorb the shock, while many will likely increase the price for end customers. Even Apple, who has mostly been able to navigate the ongoing supply chain woes with relative ease, is expected to feel the pressure in the coming months.

Also read: ASML's next-gen EUV machine will give Moore's Law a new lease of life

Overall, it looks like prices for everything with a chip in it will remain high for a while yet. TSMC and Samsung have both raised wafer prices this year to fund their ongoing efforts to expand their manufacturing capacity for advanced process nodes, which is threatening to send CPU and GPU prices into the stratosphere. It also doesn't help that PC gaming has become more popular than ever amid the pandemic, which means you'll more easily score a good deal on a gaming monitor than a gaming PC moving forward.

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winjer

Posts: 266   +1,084
All we need was another reason to increase prices even more.
2021 is the worst year ever, to be a PC gamer.
 

Dimitriid

Posts: 1,300   +2,545
I really enjoy this interaction because it is a nice example of the perpetual conflict between conservationist/green efforts and an economic system that's designed to be wasteful and toxic like Capitalism: no matter how "green" the west wants to go, their economies are still highly dependent on tech manufacturing in China and the east.

So it's not like anyone in the west will come out and say "China is irresponsible for *reads notes* caring about the environment for once and attempting to reduce emissions" yet the consequence is that the entire tech supply chain is at a risk of breaking down.

The lesson is never trust any Western Capitalist green strategy that is not immediately and unequivocally centered around de-growth on their *own* economies and cities because what we'll see is just Eco-Fascism: The west will keep blaming the "developing/third world" as the cause for the global climate crisis while still demanding that they continue to supply their endless hunger for manufactured, dirty goods.
 

Cycloid Torus

Posts: 4,842   +1,662
I think this is silly. The $10k cost of a ton of silicon still translates to a few pennies per chip. The process after the raw silicon ingot is where all the cost lies.
 

Achaios

Posts: 230   +655
It's worth noting that new GPU pricing has increased substantially compared to 1-2 months prior, and currently we are seeing 3060TI around 1K Euros again and Radeon 6600XT to around 800 euros.
 

Aceseven

Posts: 117   +174
So why is america considered the world leader again? other than the fact were equipped to kill whatever we want with ease it seems china actually controls everything thats worthwhile?

ffs man, theyre the only country that deals in sand now!?
 

wiyosaya

Posts: 6,711   +5,146
I really enjoy this interaction because it is a nice example of the perpetual conflict between conservationist/green efforts and an economic system that's designed to be wasteful and toxic like Capitalism: no matter how "green" the west wants to go, their economies are still highly dependent on tech manufacturing in China and the east.
You got it. The prevalent economic system in the world is wasteful and toxic, and, IMO, needs to change to something more sustainable in nature. Its a funny thing, but indigenous populations from various countries have understood this for centuries if not millennia but "western" styled cultures still have no f'ing clue even though the damage from everyday wastefulness is painfully obvious.

Whether we like it or not, it has to change. The writing is, and has been, on the wall for decades, yet humanity still pretends that problems do not exist.
So it's not like anyone in the west will come out and say "China is irresponsible for *reads notes* caring about the environment for once and attempting to reduce emissions" yet the consequence is that the entire tech supply chain is at a risk of breaking down.
I think the entire tech supply chain breaking down because of this is stretching it quite a bit. Just because silicon is more expensive, does not mean that the supply chain will break down, it will simply mean that buying pure silicon will cost more.
The lesson is never trust any Western Capitalist green strategy that is not immediately and unequivocally centered around de-growth on their *own* economies and cities because what we'll see is just Eco-Fascism: The west will keep blaming the "developing/third world" as the cause for the global climate crisis while still demanding that they continue to supply their endless hunger for manufactured, dirty goods.
So some people think life will end as they know it without their toys. Should humanity just ignore the simple fact that people seem to think that they have somehow gained status over their neighbors by having more materialistic crap and just keep producing more and more crap in a wasteful and toxic manner? Its this keep up with the neighbors and constant idi0tic competition over meaningless crap that is a big part of the problem.

Something has to change. Before the "Technological Revolution" people managed to live without all the gotta have it techno-crap, and if all of the gotta have it techno-crap were to disappear tomorrow, people would still find a way to live without all the gotta have it techno-crap.

The consequences of doing the same things over and over again and ignoring the effects are dire maybe not immediately for our generation, but for some generation in the not-too-distant future, at least as I see it. And doing something stupid like thinking that humanity needs to migrate to Mars or some other planet without correcting the toxic and overconsumption problems before that happens will not change anything as the problems will just follow humanity where ever humanity goes if those problems are not solved first.
 
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wiyosaya

Posts: 6,711   +5,146
See why ya don't let others do what you can do for yourself
Talk to the greedy that think that they should be able to get everything they need for free and then be able to sell it to others for an absurd profit because it will make them "rich". The vast majority will never be satisfied, and have no clue when enough is enough.
 

Rocky4040

Posts: 22   +28
Yep they like to come up with all of these excuses as to why pretty much everything whether it is electronic parts or pretty much everything else has to raise in price. Whether they use the pandemic as the first go to as an excuse and now that they have pretty much used that excuse to death they come up with other creative excuses to make sure they keep things inline with the price they like to see. Sadly this is just the beginning of it all and prices for everything we buy is going up and up and up for a very long time and will probably come down to normal pricing again. Lets face it they like taking in all of that extra cash and if I was a bean counter or CEO of coarse I would not want those prices to ever come down again.
 

quadibloc

Posts: 324   +211
It was stupefying enough back when China cut back on exports of rare-earth metals. After all, the minerals those metals come from are common around the world; they're used for making the flints used in cigarette lighters.
And now... a Chinese monopoly on silicon, which is just about everywhere there is rock, everywhere where there is ground under our feet?
Unlike the OPEC nations, China insists on dominating the world economy with its monopolies... the hard way! But then, perhaps this is indeed a pollution control measure with no malicious intent. I mean, if China had wanted to send the rest of the world a wake-up call, so that the world would protect itself against such acts by China... it could hardly have chosen a better way to do so.
But will the world wake up, and decide that the free market taking the route of least resistance is not always the best idea? Or is America's weakness in this area so fatal that it can't help itself from letting it be taken advantage of again and again?
 

wiyosaya

Posts: 6,711   +5,146
It was stupefying enough back when China cut back on exports of rare-earth metals.
We might consider that a good thing, though, since it sparked the US to reopen a rare-earth facility. IIRC, the same thing has happened with rare-earth plants in other countries, too. So, as a result, China's dominance is likely somewhat less.
And now... a Chinese monopoly on silicon, which is just about everywhere there is rock, everywhere where there is ground under our feet?
We can hope the same thing that happened with the rare-earths will also happen with this.
But will the world wake up, and decide that the free market taking the route of least resistance is not always the best idea? Or is America's weakness in this area so fatal that it can't help itself from letting it be taken advantage of again and again?
It could be argued that it has already started with the fact that rare-earth plants have re-opened the US and in other countries. It will likely only be a matter of time before some real genius CEO realizes their company can compete with the Chinese and actually make a profit in silicon.
 

scavengerspc

Posts: 1,731   +1,787
TechSpot Elite
I think one of my birds farted earlier. They deny it, but I imagine that will raise those prices some more.

fart-oops.gif
 

Theinsanegamer

Posts: 2,828   +4,476
I really enjoy this interaction because it is a nice example of the perpetual conflict between conservationist/green efforts and an economic system that's designed to be wasteful and toxic like Capitalism: no matter how "green" the west wants to go, their economies are still highly dependent on tech manufacturing in China and the east.

So it's not like anyone in the west will come out and say "China is irresponsible for *reads notes* caring about the environment for once and attempting to reduce emissions" yet the consequence is that the entire tech supply chain is at a risk of breaking down.

The lesson is never trust any Western Capitalist green strategy that is not immediately and unequivocally centered around de-growth on their *own* economies and cities because what we'll see is just Eco-Fascism: The west will keep blaming the "developing/third world" as the cause for the global climate crisis while still demanding that they continue to supply their endless hunger for manufactured, dirty goods.
Feel free to lead by example. For instance, the computer you are using made with slave labor and non eco parts, feel free to stop using that. And stop eating foods out of season, using electricity, ece.

nothing is stopping you from living in a medieval fashion, or starting your own "eco" company to produce" eco" products that dont actually move or fix the pollution issue, like solar panels and wind turbines that produce tons fo toxic waste.

And you can blame the west all you want, yes throw away culture is repulsive, but last time I checked china releases half of the world's CO2 and has enviromental regulations on par with gilded age america. That is not the fault of "toxic capitalism" but rather "toxic communism". And eco warriors will never hold china accountable for being a toxic dump of continental proportions.
 

kamisama

Posts: 17   +14
China is becoming very unreliable fast. Time to start punishing western companies that put production in China. Cheap labor just isn't worth it.