Posted on 09/14/2023 5:37:44 AM PDT by FarCenter
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Notably, some 85% of the world's population now has a smartphone. As a result, semiconductor manufacturing's call on physical resources is now very large -- much larger than that of many traditional industries viewed as contributing to inflation.
Construction has begun on an estimated $500 billion worth of chipmaking facilities since 2021, according to industry lobby group SEMI. In comparison, Reuters estimated in 2021 that global automakers would spend $515 billion over the entire following decade on EV production capacity.
Geopolitical realignment has both increased semiconductor investment and reduced efficiency. The 2022 U.S. CHIPS and Science Act has resulted in as much as $200 billion in announced private investment. Germany has recently brought out its own 20 billion euro ($21.5 billion) semiconductor investment plan.
Semiconductors' call on labor has also risen. An estimated 55 million people were employed globally in the technology sector in 2020, more than triple the number working in the auto industry.
The sector's call on physical resources cannot rise exponentially, particularly as its call on labor rises. Even influential technology analyst Azeem Azar, in his book "Exponential," notes: "Every technology that increases the use of physical resources must eventually run into physical limits. Positive returns to scale must eventually turn to diminishing returns to scale." Bitcoin alone is estimated to consume 127 terawatt-hours of electricity a year, more than the usage of half the world's economies.
It is not a stretch to consider the use of semiconductors so widespread and the call on resources so large that diminishing returns are already being seen.
Further investment in and consumption of semiconductors still advances living standards, but is no longer deflationary. As such, conditions increasingly mirror the broad inflationary trends of the 20th century, rather than the rare and temporary periods of deflation that may accompany new technologies.
It is clearly conceivable that semiconductors themselves are yesterday's news, and that artificial intelligence is tomorrow's. We may now be in the early stages of an AI-driven technology wave that ushers in the next period of technology-driven deflation.
While only time will tell, it is worth noting that AI has enormous computational demands that may actually increase use of physical resources. Until AI's influence is clearer, we should presume the world is fundamentally more inflationary than it was in the pre-pandemic decade.
LOL, what do they think AI runs on?
Imagination
“LOL, what do they think AI runs on?”
LOL! They know. But you misslead by exerpting one sentence from the article. Intentional? Or did you not understand the article?
With a significant portion of this paid BY taxpayers and not the large chip fab companies.
Semiconductors and Electricity and a lot of electricity. And when the wind dies and the AI has to make a choice between turning itself off or turning you off what is it going to be?
All economic activity requires energy consumption. Money is just an abstract representation of energy. Economics is an indirect study of energy consumption. The government making energy more expensive, or borrowing future energy production and wasting it on vote buying, inflates prices. Demonrats always do both. Thinking that technology is deflationary is a weird way of looking at it. Successful technology either makes energy cheaper, or increases energy efficiency.
Exactly. When I can use the internet to find repair parts or find tools and material and hardware to make something I want to make, it reduces waste on trial and error, and much more reduces costs of driving around visiting shops that don't actually have what I am looking for. It doesn't take much of that kind of efficiency to pay for the cost of a computer and internet service.
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