The global chip shortage

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Mon Apr 19, 2021

Want a new Playstation 5 (PS5) or thinking of buying a brand-new car or the new iPhone? Buying these could get (or perhaps has already gotten) a little tougher than a simple walk to the store. Why? This is because there just are not enough semiconductor computer chips to make them on-time and at the expected price. There are a lot of reasons why this shortage is hitting now: trickled-down delays from COVID-19 shutdowns of factories last year, an increase in demand from consumers stuck at home during the pandemic who want new computers, and more political problems such as former President Donald Trump's trade war with China.

Needless to say, as demand for products and the increasingly computerized nature of even more mundane products like cars or smart home accessories has spiked, there’s never been more need for chips. However, over the last few decades, the chip manufacturing industry has shrunk as many technology firms as possible, including chipmakers like Advanced Micro Devices (AMD) have moved to a fabless model, in which they outsource actual manufacturing to other companies to save money.

Most of the chip manufacturing is in Asian countries, where major contract manufacturers such as Taiwan Semiconductor Manufacturing Corporation Limited (TSMC) and Samsung manage production for hundreds of different chip companies. The root of the problem is a lack of investment in 8-inch chip manufacturing plants, which are largely operated by Asian companies. Despite the fact that U.S. semiconductor companies account for 48 percent of global chip sales, only 11 percent of global chip production takes place in the U.S.

However, resolving the chip shortage will most likely be a matter of time; demand will inevitably stop outpacing limited supply and things will return to normal. However, avoiding potential shortages would almost certainly necessitate more significant improvements in the sector, as we are already seeing. It was announced that a sum of $100 billion will be invested in the next three years to meet the growing demands. Intel, one of the popular chip developers, are also looking to invest $20 billion in expanding its factories in Arizona, as well as expanding its chip manufacturing capabilities to include other businesses. But in order to create a healthier supply chain over the next few years and decades, those improvements will require time and effort from the industry. Nothing is likely to make finding the hard-to-get gadget any simpler in the coming months.

 

 

Appears in
2021 - Spring - Issue 10
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