But what if AI doesn’t work out?
If the AI boom peters out, that’s bad news for the chip industry, which has used this new technology to avoid a serious slump.
Chips are getting more expensive to make. Developing new manufacturing processes cost billions of dollars; building new plants can cost tens of billions of dollars. These costs are all passed onto consumers but, outside of AI, customers aren’t keen on buying more expensive chips. The fancy technologies in today’s AI processors aren’t that useful for other purposes.
AI delayed an industry reckoning: Manufacturing is getting more expensive, while performance gains are shrinking. The economic promise of AI justifies high chip prices, but if that goes away, the chip industry needs to find something else to persuade people to sustain investment in advanced chip manufacturing. Otherwise, advanced chipmaking will become unsustainable: New technologies will cost more and more, while delivering less and less.
Given these stakes, policymakers need to encourage further innovation in AI by facilitating easier access to data, chips, power, and cooling. This includes pragmatic policies on copyright and data protection, a balanced approach to onshore and offshore chip manufacturing, and removing regulatory barriers to energy use and generation. Governments shouldn’t necessarily apply the precautionary principle to AI; the benefits are too great to handicap its development, at least at these early stages. Nor should large-scale AI applications, such as autonomous vehicles or home robotics, face unreasonably high requirements for implementation.
Investors should also explore alternate AI approaches that don’t require as much data and infrastructure, potentially unlocking new AI growth. The industry must also explore non-AI applications for chips, if only to manage their risk.
To ensure the chip industry can survive a slowdown, it must reduce the cost of advanced chipmaking. Companies should work together on research and development, as well as working with universities, to lower development costs. More investment is needed in chiplets, advanced packaging, and reconfigurable hardware. The industry must support interoperable standards, open-source tools, and agile hardware development. Shared, subsidized infrastructure for design and fabrication can help smaller companies finalize ideas before manufacturing. But, importantly, the drive to onshore manufacturing may be counterproductive: Doing so carelessly will significantly increase chip costs.
The future of chips and AI are now deeply intertwined. If chips are to thrive, AI must grow. If not, the entire chip sector may now be in jeopardy.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
