An expected surge in global demand for AI-focused semiconductors in the coming years could lead to the next wave of chip shortage, according to a latest industry report.

The global market for AI-related hardware and software was expected to grow between 40 percent and 55 percent annually, reaching between 780 billion U.S. dollars and 990 billion dollars by 2027, said an annual report released Wednesday by Boston-based consultancy Bain and Company.

“Companies are moving beyond the experimentation phase and are beginning to scale generative AI across the enterprise,” said David Crawford, chairman of Bain’s global technology practice, in a press release.

The report predicted another chip shortage brought by surging demand for graphics processing units (GPUs) from data centers, which are critical for the training of huge AI models, and for AI-enabled smartphones and laptops, with an AI-driven surge in demand for GPUs alone expected to increase total demand for certain upstream components by 30 percent or more
by 2026.

“These trends, when paired with geopolitical tensions, could trigger the next shortage of semiconductors,” Bain warned, reminding the semiconductor industry of a severe shortage during the COVID-19 pandemic.

The global chip shortage happened during the pandemic due to supply chain disruption and a rise in demand for consumer electronics. The crisis hit many industries hard, particularly the automotive industry.

The report’s authors explained that the semiconductor supply chain is “incredibly complex,” and a demand increase of about 20 percent or more has a high likelihood of upsetting the equilibrium and causing a chip shortage.

The AI explosion across the confluence of the large end markets could easily surpass that threshold, creating vulnerable chokepoints throughout the supply chain, they noted.

Bain advised chip suppliers and buyers to “act quickly to get ahead of this next, potentially massive crunch,” since it’s difficult to balance semiconductor supply and demand given the industry’s fas
t-moving technologies, large capital requirements, and long lead times to add production capacity.

Source: The Namibia News Agency