Global silicon shortage set for repeat – this time with lithium
The current supply chain disruptions and the global shortage of computer silicon is having significant effects on many businesses at present. At a consumer level, the internet is full of news of silicon shortages in the latest generations of graphics cards and CPUs. The latest big tech leader to express concerns is Tim Cook of Apple, after the company’s CFO Luca Maestri predicted loss of sales between $3bn and $4bn this quarter due to limited supply of chips.
Many businesses are beginning to see rises in hardware costs as even OEMs’ prices rise: larger OEMs source and contract for long future time periods and are less susceptible to the smaller operators’ supply-sensitive price variations.
One industry that is being especially hit hard is one that is in a significant period of transition – automotive. With a greater expectation on the latest tech being onboard, modern vehicles contain a significant amount of technology, and not just in peripherals like in-car entertainment systems. Many vehicles use computerized engine management systems, as well as telemetry add-ons, so a shortage of silicon for these is slowing down the world’s car and truck production lines.
Part of the problem is that many chip designers run “fabless” operations, in that they outsource the physical production of silicon semiconductor wafers to third parties, and not surprisingly, want to exploit economies of scale available from the largest fabrication plants. That leaves a few key industry players like Samsung, the Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics producing a majority of the world’s wafers. Anything affecting those three companies especially will have significant knock-on impact on many other verticals. A serious drought in Taiwan, for instance (where two of the world’s largest fabricators are based) will have consequences for the next 24 months, according to some estimates.
Now, the automotive industry has another crisis looming in the next decade as it moves from fossil-fueled vehicles to pure EV output — the lithium in batteries may well not be available in sufficient quantities at a reasonable cost by 2027.
The issue is not a shortage of lithium, rather that its easier methods of extraction will have depleted stocks, leaving only “marginal” resources, which cost more per metric ton to exploit. By 2028, demand for lithium overall is predicted to have reached 2.8 million tons, with availability at 2 million tons — a shortfall of 800,000 tons, assuming no new large-scale mining projects are begun.
Both the EU and the US governments are aware that they are becoming more susceptible to global shortages of core manufactured goods (microprocessors) and raw materials (lithium for batteries) and are taking steps to alleviate future supply fluctuations. Projects in North America and Europe are testing new processes for “direct lithium extraction”, using chemicals and electricity that separate the element from its carrier materials, obviating the reliance on purer forms of lithium such as those available from South America’s brine-based lithium recovery.
One method of boosting supplies of lithium is to recycle depleted batteries more. At present only around 5% of lithium battery packs are disassembled and recycled, with most ending up in landfills. In addition to heavy metal contamination leaking into the water supply, discarded batteries remain a good source of rarer elements.
However, taking apart today’s lithium-based batteries is expensive and complex, and therefore doesn’t represent a sound investment: that will surely change as shortages in supply of lithium kick in, and price equity for “new” and recycled lithium is reached.
Investments are being made in lithium battery technologies, with a $175m facility currently under construction in Rochester, New York by Canadian company Li-Cycle. Such facilities also recover cobalt, copper, gold, and nickel as well as lithium, making them valuable sources of rarer metals that can be used in batteries and other technology manufacturing processes.
As technology underpins more and more day-to-day business activities, the hardware that effectively powers today’s commercial activities will become an increasingly precious resource. That value to organizations permeates down through the supply and manufacturing chains, making even the most banal of constituent parts a commodity that has value.
Furthermore, increasing strictures on greenhouse gas emissions, water consumption (specifically used to cool cloud computing’s data centers), and carbon footprints mean that businesses and governments will be forced to think longer-term than at present.
24 September 2021
24 September 2021