A perfect storm
November 29, 2023 by Alistar Enser
I hope you managed to weather the storm over the weekend. While storms Dudley and Eunice tried their best to bring chaos – with the highest wind speeds ever recorded in England, at 122mph, off the Isle of Wight – the outlook seems to be cloudy for a number of reasons. Russian armed forces lie ready for action on the Ukrainian border. The Bank of England reports that inflation is at its highest in over 30 years, the cost of a litre of diesel around the country has broken £1.50 and domestic energy prices will rise yet again from April. I said in a previous blog that I expect things to improve by the back end of the summer, but what about now?
Well, it seems there are a lot of clouds on the horizon, so this week I thought we could talk about chips.
Before you get excited, we are not talking about the comfort food. Instead, let’s consider whether the humble microchip is turning into the new gold and how it can affect these clouds.
If one object captures the pandemic it might be the facemask or the covid test swab. But here’s another object that says as much about the way the world has changed over the last two years as these items: the humble semiconductor, or chip.
Commuting or Computing
A typical boom or bust business, chip manufacturers saw massive demand for their products. As people stayed home during the pandemic, they spent money that might otherwise have gone on commuting on computing technology -to work better from home, or on computer gaming technology- as they couldn’t leave the house. The microchip industry reported a 26.2% jump in sales to an all-time high of $555.9bn last year.
Now, everyone from car manufacturers to smartphone builders are struggling to get their hands on enough chips. Manufacturers are investing in new facilities (so-called “fabs”) as a result, and Intel is putting $100bn into manufacturing.
With the pandemic nearly over, you might think the demand for these chips would wane as we leave the pandemic and that would be true – if it wasn’t for a fundamental change in the demand for these chips. Traditionally, demand for microchips has been driven by sales of consumer devices such as smartphones, TVs and gaming consoles, but industry analysts expect demand in the future to be driven by business demand for the sensors that increasingly feature in everything from medical diagnostics devices to smart manufacturing technology – and of course, electronic security equipment.
This is confirmed in a recent report by Applied Materials which reveals that the average cost of chips in a smartphone in 2015 was $100 and is expected to be $275 in 2025. The average cost of chips used in a car in 2015 was $310 and will be $690 in 2025. And in the datacentre server market an eye watering 247% increase to $5,600 in 2025, compared to $1,610 in 2015 is forecast. Why? Because as businesses embrace IoT sensors and leverage the data these sensors deliver using AI, they will turn to cloud-based computing and data storage to make this happen.
For the security industry chips represent a crucial part of our product portfolio. It is unthinkable that in a market which has traditionally seen price erosion, we could consider increases of 247%, however, whatever the quantum, price rises are arriving thick and fast.
We as an integrator are getting daily notifications from suppliers talking about pricing increases – only last week Carrier, part of UTC, stated that their prices are increasing by up to 9% from April. They are far from unique. Supply issues and pricing pressures are also affecting other manufacturers, from Axis to HID. So if you are planning a project contact us quickly!
For this reason, agility, innovation and the ability to redesign systems where necessary are all going to be factors when securing supply chain projects and minimising risk and the impact of chip shortages. In addition, to help balance the economic challenges, end-users will almost certainly expect greater value beyond just pure security.
Regardless, in my opinion our increasing reliance on the cloud is no bad thing. The arrival of the AIoT, the combination of artificial intelligence technology and the Internet of Things, is an exciting development that will see AI move to the ‘edge’ – on a device such as a video camera.
Are too many Chips unhealthy- Taking the Technology Diet?
Processing at the edge can in some cases makes systems faster, less susceptible to network problems and more robust, however, by removing processing from edge you might also make cost savings on edge hardware. You might save chips and increase power and performance.
Think about it. There’s a reason why Alexa only works when connected to the cloud: it’s simply not possible to put the computing power of a server farm into a small speaker. We are always limited by compromise and what is practically possible to fit – and affordable– in a device. While recognising the practical limitations of bandwidth, complex computing processes are more efficient, cheaper and have less environmental impact when conducted centrally, rather than at the edge.
Indeed, in a world where we are looking at cost of energy, deployment and devices, anything that we can do to simplify the edge and to pull the resources to a central point will reduce energy consumption, allow connected thinking between devices and increase the potential power of analytics because they are not limited by the device. It will also potentially simplify systems implementation because you are not programming individual, often single-function sensors.
These types of consideration lie behind our tech day on 24 March, where among other subjects we will discuss access control as a service, the journey of access control to the cloud and video surveillance today and in the future. Speakers from Reliance High Tech and guest manufacturers will talk about how technology has evolved, how hybrid solutions are integrating worlds, how cameras are evolving for our connected world and how analytics can be undertaken efficiently in the cloud. And yes, if you are interested in chips, maybe, just maybe we will have some in the buffet lunch- but I can’t promise.
Numbers will be strictly limited and entrance by ticket only, so if you are interested in attending, please register your interest at email@example.com