Economic Dependencies in Integrated Circuits

Abstract

Life can never deliver too many reminders to approach forecasting with humility. The recent shortages in custom chips delivered another such reminder. There also may be a more epistemological lesson to learn from these events. Good analysis directs attention at the right facts, beliefs, or opinions, and dismisses irrelevant ones. Perhaps the wrong aspects received too much attention and the most relevant ones were dismissed. What did most analysts misunderstand that led to not forecasting these shortages? In other words, let us reconsider whether the prevailing view of this market analyzes events in the terms most relevant to understanding them. Today’s column argues that these shortages illustrate the role of economic dependence in the face of demand volatility. Perhaps those topics ought to be elevated to a central question in industry analysis.