Apple, Google, Tesla, Others Face Consequences Of Hardware Jobs Being Seen As 'Uncool' In Silicon Valley Amid Their Chip Forays, Says Analyst

Silicon Valley is now seeing the consequences of its excessive focus on “software” over the past few decades that deemed “hardware” out of fashion in the wake of the global semiconductor shortage, Glenn O’Donnell, research director at Forrester told CNBC on Monday.

What Happened: As per O’Donnell,  there’s a shortage of people in Silicon Valley with the skills required to design high end-processors. As a result, tech giants such as Apple Inc (NASDAQ: AAPL) and Alphabet Inc (NASDAQ; GOOG) (NASDAQ: GOOGL) are wary of setting up advanced chip factories that can match the prowess of  Taiwan Semiconductor Mfg (NYSE: TSM).

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“Silicon Valley put so much emphasis on software over the past few decades that hardware engineering was seen as a bit of an anachronism,” O’Donnell said, adding that it became "uncool" to do hardware.

“Despite its name, Silicon Valley now employs relatively few real silicon engineers.”

The tech giants and others like Tesla Inc. (NASDAQ: TSLA), which last month unveiled the Dojo chip, are currently focused on "design and performance of the chip" instead of "manufacturing and foundries, which is very costly," Russ Shaw, who previously served as a non-executive director at Dialog Semiconductor told CNBC.

Why It Matters: Besides the skill shortage, setting up an advanced chip factory, or foundry, like TSMC costs around $10 billion and takes several years. Clients usually rely on TSMC, Intel Corp (NASDAQ: INTC) and peers for their chip supplies.

See Also: Tesla Looks To Get Ahead Of Chip Shortage With Advance Payments, Mulls Buying A Plant: FT

Contract chipmakers are flexible with fulfilling various customer orders — big or small — to ensure a stream of profit. Though, the recent shortages have led some contract chipmakers to accept advance deposits from large customers to guarantee certain orders at a fixed price.

Tesla had earlier this year explored options including making advanced payments and also buying a fabricating plant, as per a Financial Times report in May.

Price Action: Apple shares closed 0.42% higher at $154.30 on Friday.

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