This month’s hosts: Dave Erickson, David Levai, Botond Seres, and Kenlyn Terai
This blog article summarizes the ScreamingBox Technology and Business Rundown’s monthly podcast series, which takes a deeper look at the latest technologies to help you understand which are gaining traction, and analyze and examine the different ways those technologies are being applied and affecting business.
Joke
What is an astronaut’s favorite place on the computer? The space bar.
Silicon Computer Chip Shortage
The silicon computer chip shortage has affected people across the globe in a multitude of ways. You may have heard recently that several automakers are shutting down some of their production lines because they’re not able to get access to silicon computer chips that are needed to integrate into the cars.
Gaming
“For me personally, I’m a bit sad about not having access to any new PC components. I heard rumors that there’s new higher quality video available and a new set of graphic cards came out, but I have yet to see one in person” Botond Seres said. His gaming has taken a hit due to this shortage. Dave Erickson was in the gaming industry for over 15 years and the idea that people can’t buy graphics cards because there is a shortage is something unheard of in the industry – it just hasn’t happened before. And obviously, in the PC market, you know, that’s holding back a lot of game sales and other things. And that’s a very big market that had the same problem. With everyone being trapped indoors there is more time to play computer games. Seres has just started playing Outriders, which seems to be the first legitimate spiritual successor to Mass Effect.
Gaming and Cryptocurrency
Kenlyn Terai added that the industry is driven by the cryptocurrency market and Bitcoin mining because they like to have faster processors, so they can mine more Bitcoin. This has caused gaming cards to be slowed down a bit so that people from the cryptocurrency industry don’t buy up all of the gaming cards for their mining.
The cryptocurrency market fluctuates. When the prices go down there’s not as many people mining and when the prices go up everyone buys graphics cards to mine because the graphics cards produce a slightly better result when you stack them and use CPUs as the processing part. The software basically runs on the server or the PC. They actually have motherboards with, for example, eight graphics card slots on them and stack eight graphics card slots on the PC, so they’re basically processing Bitcoin with all the graphics cards not actually the GPU. Bitcoin has increased in popularity over the last four to five months, so there’s probably a bunch of miners out there who are buying hundreds or thousands of graphic cards at a time. If they’re mining out of an office there’s probably 100 miners in it, speculates Erickson.
The silicon shortage affected silicon that is used by older technologies, such as Bluetooth chips, as well as more common products. There is a real struggle to produce those kinds of lower-end chips. The other issue is obviously shipping. They’re pumping out all these chips and then they have to ship them to various manufacturers, who assemble them, but a lot of that’s happening in China. The foundries in China are shipping to other factories in China, who then put the chips on the boards. If the manufacturing is done outside of China then there’s a delay due to the shipping issues because all the shipping ports are backed up, which compounds the problem. The automakers are really the ones in trouble because they’re putting those chips in locally, where they’re manufacturing the cars and doing the assembly, in the States or in Europe for example, and they are waiting on parts to be shipped.
That is also an issue in Canada. Due to the pandemic, automakers scaled back their orders from the foundries in anticipation that people weren’t going to buy cars, but then consumer electronics blew up, so automakers gave up their spot in line for parts. The foundries had to reconfigure their manufacturing, but now that they’re coming back, there’s no production lines for them anymore because now they are tools for consumer electronics, not for automakers, explains Kenlyn Terai.
Providing Supply to Various Industries
In the bicycle and health and fitness industries, Erickson said, they were all predicting doom and gloom, so they canceled a lot of orders for Fitbit watches, Garmin watches, and all things that are used for fitness and cycling. Then there was a cycling and personal fitness boom because everybody was trapped in their houses. All of these products use the more common chips and lower grade technologies, so the companies are now struggling. Now, the auto, health and fitness, and medical industries all want those chips, so they can’t build the factories fast enough. The companies that make the equipment that the factories use for making the chips, some of are Chinese, some are European, and some are American, so the equipment is what is causing the delay. Getting the physical building ready isn’t a problem, China can do that in a month. But, to order the machinery it is a six-month or year delay, so ramping up production takes a long time. Erickson said he read that it could take 12 to 18 months to ramp up production to meet the current demand. It’s difficult because there is no way to know what the demand will be like in another 18 months when the factory and machinery are ready. It could be that they needed twice as much machinery because the demand went up even more or it could be that there is less demand because people don’t need the products anymore. It’s really a complicated business and logistics problem, as well.
Terai added that the foundries began running at a deficit because they’d shut down a lot of the production because of COVID. So then, when they finally opened back up after they figured out how to manufacture safely, they were already behind and in addition they have this boom in demand.
What do the impacted companies expect right now? David Levai said he read that Intel and Nvidia don’t expect things to get better in the next two to three years. What about other companies?
It comes down to a stacking issue. In the computer industry a lot of the motherboard manufacturers, such as Asus, Gigabyte, and ASRock, don’t need the GPUs to build products because that’s what the consumer buys. However, a lot of them now have onboard graphics, so they do need GPUs. But even if they made the motherboards, the consumers could buy the motherboard but they can’t buy the chips that go into them. That doesn’t allow them to complete the computer. You can buy motherboards, but you can’t buy GPUs. All those companies mentioned previously make their own GPUs and they’re buying the chips from those people and assembling the cards, if they can’t get the GPUs, they can’t assemble the card. This results in the PC gamer, who is the biggest buyer of PCs and they are going to have a hard time getting new computer components and new parts.
Seres stated he heard that Intel is taking a pretty radical step and building a completely new foundry in the U.S., which is expected to be finished in five years.
The pandemic provided a wakeup call to many companies and they realized they would have to set up their supply chains differently. It became evident that outsourcing to China, clear across the world, and not having anything within the local market as a backup was a huge mistake. Europe learned this, as well. Erickson estimates that maybe 10 percent of production will move out of China and back into local markets to make it so that the next time this happens, and everyone is saying there will be a next time, they have a backup plan. But until then we are all suffering through shortages. Erickson pointed out that Garmin is actually selling about 20 percent more than they did in the past two years, but the demand is actually 40 percent more. So, they are missing out on that extra 20 percent of growth for their business. It is difficult to find any Garmin or Fitbit products at the moment because they are all sold out.
Apple and Apple AirTags
This silicon chip shortage is also hitting Apple because they are having trouble meeting demand and maintaining their competitive advantage. They can’t release some of their new features and products due to the silicon shortage, Terai pointed out. Apple is in an interesting position, Erickson explained, because they mostly build exclusively for Foxconn, which is one of the largest contract manufacturers in China and they don’t provide a great deal of flexibility. Apple has the money to start new production in the US or Europe, but that would take years, so in the short term there will just be a delay in product releases. This will impact developers who want to get an edge by learning the newest OS or technology that Apple’s going to introduce, but that will be delayed a year or two. Developers will feel this impact when learning new technologies or learning how to apply the new features in software or in phones or other Apple releases, so it will have an effect on the development industry, as well.
Seres explained that Apple announced a product that has been in the works for many years and everyone was anxiously awaiting its release – the Apple AirTag. The AirTag includes a new technology that is an amazing merger between software and hardware where you have a 3D guide to find your lost keys. If you have lost your keys somewhere on the street it can actually talk with other Apple devices via Bluetooth and NFC and give you the exact location of your AirTag. It is not Apple exclusive, which Seres points out, is the first time Apple made something that’s not exclusively for Apple. If you find an AirTag you can use your NFC reader on your Android phone and if it is in lost mode it will display a phone number to allow you to find the owner. Levai added it’s easier to scan an AirTag with an Android phone because you can just use NFC and put it to the phone. If you want to scan it with an Apple device, you have to open the Find My application and go to a menu and then scan it.
For the AirTags, what kind of development or business applications do you think will arise for development opportunities? It has the ability to find lost items, but are there other applications that businesses can use them for? Maybe tracking materials? Possibly supply chains or medical devices because they have such specific tracking for each device. Erickson said that RFID tracking is used in a lot of industries, but he assumes they’re different from what Apple’s AirTags are doing. He believes the Apple AirTags require scanning the devices and items. Seres explained that RFID tracking is usually more of a passive thing, whereas AirTags are active. Even though it doesn’t provide GPS information, it can communicate its ID and try to find other devices in range. It has a system that if it is switched to the “lost mode,” and someone walks by it, it can update the location via GPS. With RFID tracking, you couldn’t really do that because it would be difficult to carry a device that constantly reads RFID codes off of everything.
Facial Recognition
Security is going to become more of an issue in the future, as more devices become available that allow people to access technology. Levai believes that facial recognition is going to be utilized on a public scale first in the automobile industry. You wouldn’t need keys to start your electric car, just your face.
There are a lot of security concerns with the AirTags mentioned previously and now with facial recognition because there are a lot of ethical considerations. Terai wonders how you would confine the use to a specific purpose and not use it for something that it wasn’t intended for. A great example of this is security cameras that are set up outside of a house and potentially can track a person just walking up and down the street.
Seres says we gave up privacy a long time ago in favor of better, more personalized products and advertisements.
Erickson predicts that data privacy and how your data is accessed is going to become a bigger issue. I think as more people’s personal data gets leaked on the internet and other places, there is going to be a revolution within data security. Europe has GDPR and now California has their version of it, so it is going to become even more important. Within that, facial recognition is going to really be a key, but it’s not a proven technology, it has errors, people can manipulate it, and take advantage of it. It is a great opportunity for developers, but there’s a hardware aspect of it, as well.
At what point does it become a privacy issue? For example, what if the police and government use facial recognition software and then tie you to a crime, but what if there’s an error rate of 10 percent? That means 10 percent of the population might get in trouble without any recourse. That is something that’s going to have to really be refined and resolved for facial recognition to work and be used properly, but it is a great opportunity, said Erickson.
Facial recognition has a great benefit of securing your data without having to go through a lot except to just take an image of your face. However, there has to be a way to ensure that it isn’t forged or hacked. Since it is recognizing somebody through an image, that image can be transferred and manipulated, so facial recognition has to address those issues. In some countries it might be a sensitive topic and they might not allow it at all.
What can be combined with AI? Seres explained that in European legislation it doesn’t specifically say that facial recognition is going to be illegal, however, it proposed that the use of AI software to aid in facial recognition should be illegal. When AI is introduced there becomes an error rate that is huge.
The advantage of facial recognition is that everyone’s faces are unique. The problem with facial recognition is people’s faces change over time, which is going to be a big challenge to the industry. In the beginning, the applications for facial recognition are going to be more simplified and orientated around access. But, how do they make sure that that access is given to the right person and that somebody isn’t hacking into the system? This is a question for another discussion, though.
Conclusion: The intersection of technology and business can be extremely interesting, but it often raises a great deal of questions. Please, join us for our next exciting exploration of technology and business in the first week of every month. You can find the audio and video versions of this article on the ScreamingBox YouTube page and on Transistor. If you don’t want to miss the next episodes, follow us and look for an article following each podcast that summarizes the topic here on the ScreamingBox blog page.