What’s Causing a Worldwide Crisis in Electronic Components, and How Businesses Are Responding
We can all agree that semiconductors are an integral element of the high-tech world in which we now reside. It’s true that chips are what keep the world going. Electronic devices, automobiles, medical equipment, airplanes, smart appliances, and wearables all have them as a crucial component. In addition, semiconductors have found their way into the military and similar settings. The annual production of chips is somewhere around a trillion, with roughly 128 chips produced for each person on Earth. Leading producers of cutting-edge CPUs include American firm Intel, South Korean firm Samsung, and Taiwanese firm TSMC.
The spread of the coronavirus epidemic boosted interest in these chips. 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. The result was a worldwide shortage of chips, and there are no signs that the situation will improve any time soon. The semiconductor supply to the manufacturing units is inadequate. Because of the scenario, big players in the technology and automotive industries are seeing drops in sales.
It’s been two months since I wrote about the “Semiconductor Component Shortage that has Hit Automobile and Consumer Electronics Market,” and nothing has changed. We wanted to find out what went wrong and when the problem will be fixed, so we decided to investigate it today. 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. Students were also urged to stay at home and complete their coursework online as a result of the pandemic. 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. Due to fears of a potential shortage, several customers bought extra laptops and other electronic goods. 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 warned investors to expect production 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. More modern automobiles have a greater demand for semiconductors, contributing to the scarcity. 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. After increasing by 5.1% between 2019 and 2020, the Semiconductor Industry Association predicted in December that global chip sales would increase by 8.4% in 2021, reaching $433 billion.The increasing demand for electronics has resulted in a severe shortage 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. Because of the sanctions, many large semiconductor customers shifted their business to TSMC. China has also halted its purchases of semiconductors from abroad. Both the United States and China are striving to become “The Tech Superpower,” but the United States has made allegations of human rights breaches and intellectual property theft against China and 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?
Many US policies were poorly implemented, and global coordination was lacking as well. This is the primary issue that requires fixing.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 White House has taken action to address the semiconductor shortage and get the US supply chain back on track. The most pressing issue is not recovering from the supply chain catastrophe, but rather preventing similar breakdowns in the future.
Executives claim they can increase production to eliminate the deficit, but they won’t be able to do so until later in 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.
The world’s largest chip manufacturers are working to boost production, but even if they are successful, the increases are likely to be insufficient to meet demand. Everything from automobiles to kitchen appliances to laptops is being slowed down even more because of this.”The supply constraints, and ‘immense’ investment needed to meet demand,” Intel CEO Pat Gelsinger said, “mean that the chip shortages affecting the automobile industry and other sectors are likely to last for two more years.”
What companies are doing to resolve the Issue?
This chip scarcity will be resolved in due time, and it is expected that there will be no significant difference between the two in the future. Major modifications should be implemented on a worldwide scale to prevent such events from happening again. Major chipmakers have gotten on their feet and are prepared to make significant adjustments.To accommodate increased demand, TSMC has announced a $100 billion investment over the next three years.Adding a new significant supplier to the market, Intel has announced a $20 billion expansion of its fabs in Arizona to create chips for other companies.
Vice President Joe Biden has requested $37 billion to implement his plan to dramatically increase domestic chip production.Two facilities by Intel Corp., one by TSMC in Arizona, and one by Samsung in Texas are among the four that are planned. In an effort to lessen its reliance on Western technology, China has also provided a plethora of subsidies to the semiconductor industry.
Although significant efforts are being made to address the current chip shortage, industry leaders predict that the situation will persist into 2019. The current chip scarcity is expected to last until at least 2022, and possibly 2023, according to key chip-makers TSMC, Nvidia, and Intel.Let’s hope that, with the right steps done everywhere, the chip scarcity problem is remedied and we never have to deal with this again in the future.