Note to the reader: For this post the term Integrated Circuit is abbreviated to IC and can just be thought of as a fancy term for microchip logic.
Proclamations of a chip glut are everywhere. Intel, after establishing a $50B subsidy from congress, has just announced one of its worst quarters ever due to this tremendous chip glut that has happened all of the sudden. Yet automakers are still paying “eye-watering prices” for auto-chips that Bloomberg is calling gray market.
It is far from 2022’s greatest paradox but it still begs for an explanation. Everyone either has not enough or too many microchips.
Almost every person on earth has felt the impact of the chip shortage. Even now it remains fresh in consumers’ minds that used car prices had inflated at least 41% this past March according to the Senate Commerce Committee[0] and shortages will keep car prices high well into 2023, possibly beyond[1]. We should be asking the question, what role might logic locking have had in the chip shortage?
Partial blame has been placed everywhere except on logic locking, it seems. Senators blame too many of the cutting edge foundries being in Taiwan. Higher demand for consumer electronics in the wake of the work-from-home and school-from-home shift seems to have had some role. And even fears of trade-war escalation with China seems to have had a partial impact with Chinese firms willing to pay a premium to import the state-of-the-art 7nm and 4nm chips that they have been embargoed from being allowed to produce themselves. And good lord, we even have the contradictory claims from Bloomberg and WSJ that auto-chips are too “legacy” and cheap to entice chipmakers into production, while the Financial Times just claimed the exact opposite 5 days before Christmas, stating some “advanced power semiconductors” for automobiles are already sold-out through 2023 due to the race to switch to electric cars[2].
When narratives are this varied, the truth often lies unacknowledged somewhere in the middle of these contrasting claims. Most stated things don’t seem to explain the prolonged chip shortage we have today. Rather, they just largely seem part of a campaign to get the $75B corporate hand out, The Chips Act, passed. The same also goes for its multibillion euro corollary bill that the EU did, not to mention other earmarks. And without a principled understanding of what happened and why, we can’t be sure the corrections that are falling into place will prevent a repeat of the same mistakes.
After all, the existence of cars predated the existence of computer chips; and the 1994 Isuzu pickup-truck was the last model car to be carburated, meaning it was the last personal vehicle that did not require a modern semiconductor to be retailed. And by many accounts carburated cars were becoming less reliable as automakers adapted them to meet ever lowing emissions standards. That is the glum reality of how carbureted vehicles were forced out of the marketplace, artificially inducing automakers first reliance on microchips for their fuel injection systems through government regulation.
But peering through the contemporary journalistic nonsense, there is one thing most seem to be getting right. This bad of a chip shortage could have been caused by producers – like car companies – being unwilling to stockpile computer chips.
Still, even that doesn’t tell the whole story. In truth, it would seem very reasonable that automakers did not stockpile chips. But the narrative being pushed, stated as fact even, is that these companies “are [only] now realizing the importance of semiconductors” as if all of them were too incompetent to understand their own supply-chain vulnerabilities[0,1,2,3]. I tend to think car companies a little more competent than that type of decision would portray them.
A clear-eyed view of how this shortage happened needs to be done as we bear in mind the words of Senate Commerce Committee Chair Cantwell. As she said it, this is about those who are feeling the most inflationary pain: “it’s the person whose radiator blew out last week and just needs anything on four wheels that can get them to their job.” The person whose “next month rent can’t be paid.”
Since at least the mid-2000s, computer chips have been an artificially scarce product. Simply put, chipmakers know they need to elude antitrust and anti-competitive litigation. The traditional claim from academics has been that design theft and supply-chain security are both protected with logic locking. This rationale has always been weak at best, which makes it appear that chipmakers have long ago bought and paid for the opinions of infotech academics such that many portend that this artificial chip scarcity induced by logic locking is intrinsically linked with supply-chain security.[4,9,10]
Luckily, this rationale can no longer be pretended to hold as a comprehensive study published just this August concluded “logic locking is an insufficient countermeasure in the presence of invasive attacks.”[5]
So, in reality, today’s semiconductor market operates as one big rent-seeking scheme. To understand the brazen lack of enforcement on this anti-competitive behavior among the so called “fabless”1 semiconductor companies we can also look to the rationale of the sometimes eloquent Alan Greenspan who once famously wrote:
The world of antitrust is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously.
To be sure, antitrust would likely not be an effective remedy because chip designs are copyrighted. Copyright legal precedents — as opposed to patents — have largely not had to deal with copyrighted designs being able to grind economies of scale to a halt like the commodity automotive computer chips have done2. One of the assumptions of copyright law is that the owner of the copyright can be trusted with their own goodwill insofar that they have an incentive to see their work proliferate, but chip designs have flipped this assumption about copyright on it’s head. Copyrighted chip designs are so locked down that not even the alleged deaths they caused to 89 people could not get the chip designs in question released to NASA for their investigation prior to the 2013 Bookout v. Toyota Motor case that resulted from one of those 89 auto-chip induced deaths[6].
Unpacking this all a bit more, let’s look at how two companies were innovative enough to survive the 2021 shortages relatively unscathed. Tesla rewrote much of its firmware to accommodate the chips it could get its hands on but that was only possible because they are so cash flush from their crazy high P/E. And Toyota bit the bullet on a scheme for stockpiling needed chips. It appears this scheme was implemented shortly after their cars started accelerating uncontrollably because of the flawed microchips that resulted in the deaths of those 89 customers accelerating well beyond 100 Mph in the late 2000s[7].
One of those customers even called 9-1-1 as his Lexus uncontrollably reach top speed. He crashed and died along with his family in the car while on the phone with the dispatcher that was captured in this horrifying audio.
That crash killed all four family members in the car including the 13 year old girl who you
