The Cause of the Worldwide Electronic Components Shortage and the Steps Being Taken to Address the Crisis

We can all agree that semiconductors are an integral element of the high-tech world in which we now reside. As a matter of fact, chips are what keep the world going. They are an essential part of any modern electronic gadget, whether it be a smartphone, computer, car, medical equipment, airline, smart appliance, or wearable tech. The military and similar organizations also make use of semiconductors. About 1 trillion chips are produced annually, or 128 chips for each person on Earth. Leading producers of cutting-edge CPUs include American firm Intel, South Korean firm Samsung, and Taiwanese firm TSMC.

Demand for these chips rose in part because of the global spread of the coronavirus. It has altered purchasing habits, with more individuals investing in laptops, smartphones, tablets, etc., so they may be productive while seated in the comfort of their own homes. This caused a worldwide shortage of chips, and it shows no signs of ending. The semiconductor supply to the manufacturing units is inadequate. Major players in the technology and automotive industries are suffering sales declines as a result of the scenario.

Two months ago, I wrote about the “Semiconductor Component Shortage that has Hit Automobile and Consumer Electronics Market,” and nothing has changed since then. We wanted to investigate the backstory of this incident and find out when we can expect a solution. What is being done to remedy it, and how long it is expected to take to restore the supply of electronic components, will also be discussed.

Why did the Global Chip Shortage happen and which sectors are affected the most

The chip shortage was unquestionably caused by the COVID-19 epidemic. Because of the pandemic, many people had to work from home, and many students were convinced to stay in and take online courses. As a result, more investment was made in computing hardware, more time was spent playing video games, and more cloud resources were needed as enterprises rushed to implement remote work systems and cloud computing. People were afraid they wouldn’t be able to get their hands on enough of certain electronics, so they started stocking up. The result was havoc in the supply chain.

Companies in East Asia cranked up their production plants in response to rising demand for automobiles, which in turn boosted demand for semiconductors. Many car companies, including Ford, Honda, Fiat Chrysler, and General Motors, have reported difficulty sourcing semiconductors and have cautioned investors to expect manufacturing delays as a result.The chip shortage could reduce GM’s profitability by as much as $2 billion, the company said.

Electronic companies like AMD, Qualcomm, Sony, and others have also been experiencing chip shortages, making it difficult for them to produce their goods. There is no indication that the demand for semiconductors will decrease anytime soon, especially as electronic companies try to increase manufacturing. The increasing sophistication of automobiles is also a major contributor to the shortage, since these vehicles require more and more semiconductors to power their systems. The shortage of semiconductors is mostly attributable to the automotive industry’s efforts to increase the number of features included in modern vehicles.

What does Stats Indicate?

In the future months, there may be a scarcity of semiconductors because demand is rising steadily. From a total of $433 billion in 2020, global chip sales are projected to increase 8.4 percent in 2021, according to the Semiconductor Industry Association. This is an increase of 5.1 percent from the period between 2019 and 2020.As the demand for electronics continues to rise, so does the scarcity of semiconductors. As a result, there is now a backlog at outsourced semiconductor manufacturing because of the change in business models.

The United States government imposed sanctions on SMIC, a leading chip manufacturer, preventing it from acquiring sophisticated manufacturing equipment from that country. As a result, the sanctions drove major chip customers to TSMC, resulting in a shortage. China has also ceased importing semiconductors from other countries. Both the United States and China are striving to become “The Tech Superpower,” but the United States has made accusations against China for human rights breaches and intellectual property theft, and it has prevented some Chinese enterprises from gaining access to American technologies. To lessen its reliance on foreign countries, China is spending heavily in technological independence.

What’s the solution?

Poor global coordination and implementation of many US policies were major problems. That’s the primary issue that requires fixing right away.In order to overcome these obstacles, nations should collaborate.

Vice President Joe Biden has requested an investigation into the United States’ dependence on foreign countries to fulfill its semiconductor needs. The lack of semiconductors has prompted the US government to adopt corrective measures to restore the country’s supply chain. The most pressing issue is not recovering from the supply chain catastrophe, but rather preventing similar breakdowns in the future.

Executives think they can increase production to eliminate the deficit, but that won’t happen until the second half of 2021. New 5G telecom networks are required by smartphones with 5G-enabled chips, and the proliferation of IoT devices is expected to raise the need for semiconductors once the acute shortage problem is rectified.