A new architecture

The global chip industry is becoming at once more diverse and more concentrated. The effects will be anything but nanoscopic

ON JANUARY 13TH Honda, a Japanese carmaker, said it had to shut its factory in Swindon, a town in southern England, for a while. Not because of Brexit, or workers sick with covid-19. The reason was a shortage of microchips. Other car firms are suffering, too. Volkswagen, which produces more vehicles than any other firm, has said it will make 100,000 fewer this quarter as a result. Like just about everything else these days—from banks to combine harvesters—cars cannot run without computers.

The chipmaking industry is booming. The market capitalisation of the world’s listed semiconductor firms now exceeds $4trn, four times what they were worth five years ago (see chart 1). Chipmakers’ share prices have surged during the covid-19 pandemic, as work moved online and consumers turned to streaming and video games for succour.

This has propelled a wave of dealmaking. In September Nvidia, which designs powerful chips for gaming and artificial intelligence (AI), said it would buy Arm, a Britain-based…