The Global Computer Chip Shortage
The current global chip shortage is expected to subside by mid-year, but you may have to wait a while longer and perhaps even pay a premium. Semiconductors will be scarce for years to come, and the market recovery and 2021 recovery remain fraught with uncertainty.
The global shortage of computer chips is expected to continue for most of this year, a downside that was triggered by the Covid 19 pandemic and exacerbated by other factors. The chip shortage was originally focused on the automotive industry but is a product of the pandemics that helped tip our global economy into recession in 2008, turning supply chains upside down and changing consumer purchasing behavior. A combination of factors has disrupted the supply chain, as many companies in the technology and automotive industries have faced chip shortages, forcing them to scale back production and raise prices to end customers.
Meanwhile, it is no secret that the world is experiencing a shortage of chips, not to mention ongoing pandemics.
It also does not help that demand for chips has risen to unprecedented levels in recent years, driven by the increased cost of materials for semiconductors and the products that depend on them for functionality. Industry insiders recently estimated that demand for silicon would outstrip supply by at least the end of this summer, and some pointed to increasing supply diversity – by factors such as the increase in the number of semiconductor manufacturers that could extend well into 2022.
TSMC says it and the semiconductor industry are well prepared to deal with the ongoing drought, but they account for only about 10 percent of the global chip market, or about $1.5 billion.
Samsung, which now leads TSMC as the world’s leading wafer manufacturer, is unlikely to be able to satisfy its demand for more than 10 percent of the global chip market. PC shipments are growing at their fastest pace in a decade, with manufacturers suffering from low inventories at a time when chips for displays and passive components are hard to come by. In recent years, demand for computer chips has exploded, as millions of workers work from home and purchase more smartphones, PCs, and game consoles. Samsung, which is now behind TS MCM in the World’s Leading Wafer Manufacturers Association (WMA) survey, has not been able to satisfy its own demand of around 1.5 million chips.
As a result, US automakers are now competing with the widespread consumer electronics industry for the supply of chips. Chipmakers have begun to redeploy their capacities to respond to the “virtual work pattern” in which consumer electronics is growing, John D’Ambrosio, chief executive of Intel Corp, said at an investor conference last year.
Consumers are also buying more chips than industry officials had expected in the spring, further straining demand. Consumers also bought more processors and other components than expected in the spring, further straining supply.
The shortage has spread to other consumer electronics, including smartphones, refrigerators, and microwaves. As companies use chips in production and panic – and buy to prop up stocks – the shortage depresses capacity and drives up prices, raising the price of the end product.
Computer chips drive the products that connect, connect and entertain us in a world that is increasingly dependent on technology. The car has become the most popular form of electronic transport, from cars to televisions and refrigerators. But, as the US economy recovered from a pandemic, these vital cogs are in short supply.
And in China, where factories have been closed because they are unable to finish vehicles that look like computers on wheels, the situation is even worse. This has made it impossible for schools to buy enough chips to enable students to access what they learn at home and has delayed the development of new technologies such as mobile phones, tablets, and computers. And it has created a shortage of computer chips that have found their way into everything from cars to televisions and refrigerators.
The problem has recently been exacerbated by grounded container ships blocking the Suez Canal and stalling the flow of chips to Asia and Europe. The chip shortage is threatening not only the US market but also the global economy, according to market research firm IHS Global Insight. Renesas Electronics’ Japanese chip plant and the ongoing disruption following severe winter weather in Texas will make the situation worse, “IHS said.
Automakers have limited options to secure additional supplies because of the chip shortage in the US, according to IHS Global Insight.
The shortage of chips has made it difficult for manufacturers to find the stocks needed to manufacture computer-operated goods. Prices are 25% higher than last year due to the shortage of chips, and the pandemic has shut down chip factories. Consumers then upgrade their computers at home to take advantage of the limited supplies that remain.