Google has become the latest big name to join the chipmaking trend being buoyed by high demand for standard chips, which has scuttled production in the global tech space.
The race by traditional chipmakers to develop enough chips in the face of the scarcity has yielded unsatisfying results, birthing the quest for self-sufficiency by big players in the tech industry. Nearly every month, a Big Tech company announces it is developing its own chip.
Apple, Amazon, Facebook, Tesla and Baidu are all shunning established chip firms and bringing certain aspects of chip development in-house, according to company announcements and media reports.
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“Increasingly, these companies want custom-made chips fitting their applications’ specific requirements rather than use the same generic chips as their competitors,” Syed Alam, global semiconductor lead at Accenture, told CNBC.
“This gives them more control over the integration of software and hardware while differentiating them from their competition,” Alam added.
Google plans to roll out the CPUs for laptops and tablets, which will run on the company’s Chrome operating system, in around 2023, three sources with knowledge of the matter told Nikkei Asia.
The new CPUs and the mobile processors that Google is developing are based on the chip blueprints of Arm. The company has high hopes for the Pixel 6 range and has asked suppliers to prepare 50% more production capacity for the handsets compared with the pre-pandemic level in 2019, two people told Nikkei Asia
Apple was the first to embrace the chip idea in November 2020, when it announced it was divorcing Intel’s x86 architecture to make its own M1 processor that is currently in its new iMacs and iPads.
Now Amazon, Facebook, Microsoft, Tesla, Baidu and Alibaba Group Holding are all in the race to build their own semiconductors to power their cloud services and electronic products.
But the reason for their decision to design their own chips appears to go beyond the desire to have enough. Russ Shaw, a former non-executive director at U.K.-based Dialog Semiconductor, told CNBC that custom-designed chips can perform better and work out cheaper.
“These specifically designed chips can help to reduce energy consumption for devices and products from the specific tech company, whether it relates to smartphones or cloud services,” Shaw said.
Apart from the energy benefits, specifically designed chips make it easier for companies to develop custom-made products.
“We found that all the tech titans are joining the foray to building their custom chips because in that way they could program their own features into those chips that could meet its specific needs,” Eric Tseng, chief analyst with Isaiah Research, told Nikkei Asia. “In that case, these tech companies could easily adjust R&D workloads without being restricted by their suppliers and offer unique services or technologies. In an ideal scenario, using one’s own chips also means better software and hardware integration.”
However, like Google, whose CPU is going to be based on the chip blueprints of Arm, all these companies are not looking to develop the chips all on their own. The reason being that setting up an advanced chip factory, or foundry, like TSMC’s in Taiwan, costs around $10 billion and takes several years.
“At this stage, it is not about the manufacturing and foundries, which is very costly,” Glenn O’Donnell, research director at analyst firm Forrester, told CNBC, adding that there’s a shortage of people in Silicon Valley with the skills required to design high end-processors.
Where are we ramping up capabilities at our own level in this part of the world? I can only think of Dangote and Rabiu, who are helping out greatly at industrial level, but a lot more are still needed from several players across the markets.
We are too academic here, we read and analyse what the tech behemoths are doing, but most times forgetting that what they are doing is equally applicable at every other level.
How we setup and run businesses matter, if the purpose is just to escape hunger and poverty, then the necessary capabilities for solving big problems will remain elusive. We may not be at chipmakers level, but we must work to control the value chain in our space too.
Evolution is the keyword, we must aspire to evolve our processes and quality of problems we solve.