All You Need to Know About the Global Chip Shortage

Every digital or electric device we ever use contains a chip, even your smartphone that you use to communicate with others, shop online, and probably even watch Cox customer service number on. There are chips present in items you wouldn’t have expected like a refrigerator, washing machine, and an electric toothbrush. They power up our devices actually. Unfortunately, the world is running out of chips.
Nope, chips don’t grow on trees. They are man-made but because of the COVID pandemic, their production was put on hold and now, we don’t have enough of them. The increased demand for electronics during the pandemic has rippled up the supply chain. Orders began pilling up and manufacturers struggled to create enough chips for meeting the new levels of demand.

Currently, the demand for chips is so high, manufacturers are failing to make enough chips to meet the demand. This means consumers will have to pay a higher price for these goods.
Right now, what we have is a global supply shortage of chips. Nissan is going to make 50k fewer vehicles because of the shortage. General Motors had to slow down the production of its pickup trucks because of the shortage of semiconductor chips. The company has parked thousands of vehicles that are completed but they need chips. Even Apple’s CEO has warned the public that the shortage of chips could affect the sales of tablets and iPhones.

What Are These Chips Exactly?

Chips go by the name microchips and semiconductors. They operate the same way our brains do. You can even call them brains of the electronics. They may be tiny but they can host billions of transistors inside. These transistors are like gates which allows the electrons to pass through them. Multiple steps are involved in the construction of these chips.

A professor of electrical and computer engineering believes that we used 100 billion chips a day around the world. They are the lifeblood of our society even before the pandemic.
These chips were originally an American invention but slowly and severely, the number of US manufacturers started declining, and now, Taiwan and Korea control the share of chip production. Back in 1990, America was producing 37% of the chips but now, the share is just 12%.

What Caused the Chip Shortage?

On the surface level, the pandemic is to blame since it shut down several factors. But there is more to the story. COVID also shut down ports for months. Almost 90% of the electronics worldwide take the Yantai port in china, which was closed. This left hundreds of ships waiting to dock. Even after the ports were reopened, bottlenecks emerged because of items waiting to be shipped. The transportation supply chain can’t handle this buildup. Labor shortages caused the supply chain to plunge even more.
In short, it was bad decisions, bad luck, and increased demand that caused a shortage of chips. People at home are using their phones, tablets, gaming, and streaming devices more than ever before. The demand for gadgets has skyrocketed and manufacturers are in need of chips to complete the manufacturing.

It’s not just a fault on the manufacturer’s end. When COVID hit the world, many companies canceled their chip orders assuming the economy is likely to receive a heavy hit. Car companies were the ones to cancel the orders in particular. As a result, manufacturing units shifted their focus and started making chips for consumer products. This caused a shortage of car chips, which explains why car prices have increased lately.

Should We Even Care?

Well, the answer to that depends. Since there is a shortage, the prices of semiconductor chips have skyrocketed. As a result, the auto industry has been hit hard. US manufacturers have no choice to make 1.5 to 5 million fewer cars. Even giants like tesla revised their software to support alternative chips in order to continue the production of cars.
Companies like Sk Hynix and Samsung along with the South Korean govt. have promised to make $451 billion of investment in capacity for the chip makers. The supply chains for chips have to be diversified for decreasing the reliance on South Korea and Taiwan alone for chip manufacturing. That’s why companies like Intel are also considering spending $20 billion on two new factories to produce chips in Arizona.

Experts believe the supply of chips is going to rebound by the end of 2021. It is expected for the shortage to remain until 2023 and even beyond. Desperate measures might be required.

Notify of
Inline Feedbacks
View all comments
Share via
Copy link