The global surge in demand for artificial intelligence (AI) technologies could lead to a new semiconductor shortage, according to a recent report by consultancy firm Bain & Company.
The report, released on Wednesday, forecasts that the global market for AI-related hardware and software is expected to grow between 40% and 55% annually, reaching $780 billion to $990 billion by 2027. This explosive growth is driven by companies moving beyond experimentation and beginning to scale generative AI technologies across enterprises.
“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.
The anticipated surge in demand is expected to significantly impact the semiconductor industry, particularly in the production of graphics processing units (GPUs). GPUs are critical components for training large AI models and are essential in AI-enabled smartphones and laptops. The report predicts that the AI-driven demand for GPUs alone could increase total demand for certain upstream components by 30% or more by 2026.
“These trends, when paired with geopolitical tensions, could trigger the next shortage of semiconductors,” Bain warned in the report.
During the COVID-19 pandemic, a global chip shortage occurred due to supply chain disruptions and a spike in demand for consumer electronics. Industries worldwide, especially the automotive sector, were significantly affected.
The authors of the report explained that the semiconductor supply chain is “incredibly complex,” and even a 20% increase in demand has a high likelihood of disrupting the equilibrium and causing shortages. The rapid adoption of AI technologies across large end markets could easily surpass this threshold, creating vulnerable choke points throughout the supply chain.
Bain advised chip suppliers and buyers to act swiftly to anticipate and mitigate this potential crunch. The firm emphasized the challenges in balancing semiconductor supply and demand due to the industry’s fast-paced technological advancements, substantial capital requirements, and long lead times to add production capacity.
“It’s difficult to balance semiconductor supply and demand given the industry’s fast-moving technologies, large capital requirements, and long lead times to add production capacity,” the report stated.
Reference(s):
AI demand may trigger new global chip shortage, Bain report warns
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