Tech giants are dashing to develop their very own chips – here is why

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Google CEO Sundar Pichai talks about the company’s third generation chips for artificial intelligence.

Source: YouTube screenshot

Some of the largest tech companies in the world are not satisfied with relying on high-demand off-the-shelf chips, but are developing their own semiconductors.

Apple, Amazon, Facebook, Tesla and Baidu are all avoiding established chip companies and bringing certain aspects of chip development into the house, according to company announcements and media reports.

“These companies increasingly want custom chips that meet the specific needs of their applications rather than using the same generic chips as their competitors,” Syed Alam, global semiconductor director at Accenture, told CNBC.

“It gives them more control over the integration of software and hardware while also differentiating them from their competitors,” added Alam.

Russ Shaw, a former non-executive director at Dialog Semiconductor based in the UK, told CNBC that custom chips can work better and work cheaper.

“These specially designed chips can help reduce energy consumption for devices and products from the technology company, whether it’s smartphones or cloud services,” said Shaw.

The ongoing global chip scarcity is another reason big tech companies think twice about where to get their chips from, Glenn O’Donnell, research director at analyst firm Forrester, told CNBC. “The pandemic has severely affected these supply chains, which has accelerated efforts to make their own chips.”

“Many were already feeling constrained in their pace of innovation because they were tied to chipmakers’ schedules,” said O’Donnell.

AI chips and more

At the moment, hardly a month goes by without a big tech company announcing a new chip project.

Perhaps the most notable example came in November 2020 when Apple announced it was moving away from Intel’s x86 architecture in order to develop its own M1 processor, now stuck in its new iMacs and iPads.

Recently, Tesla announced it would build a “dojo” chip to train artificial intelligence networks in data centers. The automaker began producing cars in 2019 with its custom AI chips that help the on-board software make decisions in response to what’s happening on the road.

Baidu launched an AI chip last month designed to help devices process huge amounts of data and increase computing power. Baidu said the “Kunlun 2” chip could be used in areas such as autonomous driving and had arrived in mass production.

Some of the tech giants have chosen to keep certain semiconductor projects under wraps.

Google is reportedly nearing the introduction of its own CPUs for its Chromebook laptops. The search giant plans to start using its CPUs in Chromebooks and tablets that run on the company’s Chrome operating system by around 2023, according to a report by Nikkei Asia dated Sept. 1. Google didn’t immediately respond to a CNBC request for comment.

Amazon, which operates the world’s largest cloud service, is developing its own network chip to power hardware switches that move data in networks. If it works, it would reduce Amazon’s reliance on Broadcom. Amazon, which is already developing a number of other chips, didn’t immediately respond to a CNBC request for comment.

Facebook’s lead AI scientist told Bloomberg in 2019 that the company was working on a new class of semiconductors that would function “very differently” from most of the existing designs. Facebook did not immediately respond to a CNBC request for comment.

Design, but not manufacture

At this point, none of the technology giants want to do the entire chip development themselves.

“It’s all about the design and the performance of the chip,” Shaw said. “At this stage, it’s not about manufacturing and foundries, which is very costly.”

Building an advanced chip factory or foundry like TSMC’s in Taiwan costs about $ 10 billion and takes several years.

“Even Google and Apple are reluctant to build these,” said O’Donnell. “They’ll go to TSMC or even Intel to build their chips.”

O’Donnell said there is a shortage in Silicon Valley of people with the skills necessary to develop high-end processors. “Silicon Valley has placed so much emphasis on software over the past few decades that hardware engineering has been viewed as an anachronism,” he said.

“It got ‘uncool’ to develop hardware,” said O’Donnell. “Despite its name, Silicon Valley has relatively few real silicon engineers today.”

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