News of the global chip shortage has gotten so far this year that it has become a meme. “Sorry, I forgot to do the dishes. There’s a global shortage of chips.” But as with many jokes online, there is some truth to it. The semiconductor chip crisis is real and has seriously impacted our lives. Cars are more expensive and more challenging to build. Computer manufacturers are racing to keep up with insatiable consumer demand for remote work and school devices. And countless products have been delayed, with release dates pushed forward like dominoes throughout 2021 and years to come.
Table of Contents
Why is this happening?
The pandemic has disrupted nearly every feature of the global stream chain, the often invisible industrial, transportation, and logistics route that merchandise travels from where it is produce, extracted, or cultivated. An additional company or consumer at the end of the chain has paid for the finished product. Scarcity has caused the price of many things to rise
When did all this start?
These disorders date back to early last year, at the pandemic’s start. Then, factories in parts of the world where much of the world’s manufacturing capacity is locate countries like China, South Korea, and Taiwan, Southeast Asian countries like Vietnam, and European industrial giants like Germany—were affected by the spread of coronavirus cases. Because workers fell ill or were confined, many factories closed or were a forced to scale back production. In response, shipping companies cut their schedules to anticipate the fall in demand for transporting merchandise worldwide.
In the long run, that was a terrible mistake. Demand for some things—restaurant meals, trips to vacation destinations, spa services—actually plummeted.
Couldn’t Factories Produce More?
Many did, but this created its difficulties. Almost always, factories have to buy components to produce what they export. For example, a computer assembled in China might need a chip made in Taiwan or Malaysia, a flat panel display from South Korea, and dozens of other electronic components worldwide that need specialized chemicals from different parts of China or Europe.
The tremendous increase in demand overwhelmed the transportation system for goods to the factories that needed them. At the same time, finished goods—many made in China—were piling up in warehouses and ports across Asia due to a severe shortage of shipping containers, those standard-size steel boxes that carry goods on giant ships.
Low Impact Technology
Leaders of the technology sector, one of the most affected by this complicated scenario, predict that the crisis will persist for at least this year. Bracken Darrell, CEO of Logitech International, expects the global semiconductor shortage to continue into 2022. “I think it’s going to last for a while. I don’t think (the shortage) will be that severe by the time we get to the end of this calendar year, but it is here.”
He is not the only one in the industry to say that shortages will persist. Also, Mark Papermaster, chief technology officer and executive vice president of Technology and Engineering at AMD, points out that the lack could dissipate by 2023. Papermaster specified: “In our markets, the offer is relaxed from the second half of 2022 until 2023. That is when we are projecting the normality of the balance between supply and demand.”
Meanwhile, Intel CEO Pat Gelsinger stated that the company expects this situation to last until 2023. “COVID-19 disrupted supply chains and caused negative growth. Demand soared 20% year-over-year, and interrupted supply chains created a huge gap. But, unfortunately, that explosive demand has persisted,” he stated.
A Growing Market
Beyond the duration, the truth is that the semiconductor manufacturers have been the most benefited.
According to data from Gartner, revenue from the sale of semiconductors increased by 25.1% in 2021, totaling $583.5 billion. The analyst firm assures that this is the first time that sales revenue has exceeded the $500 billion barriers in three months.
Many electronic devices rely on semiconductor chips to function, including cars, phones, game consoles, etc. It is the reason why many industries are being affected by shortages.
Furthermore, as more industries continue their journey towards digital transformation, the demand for the chips will continue to increase.
When will this Shortage End?
No one tells for sure, but there’s a decent motive to suspect it will stretch well into next year. Shortages and delays can hurt this year’s holiday shopping season, creating essential items much harder. In addition, many companies placed their orders in advance, exacerbating shortages and sending more significant volumes of merchandise to ports and warehouses.
The 2020 present global chip shortage is an ongoing international crisis in which the demand for integrated circuits exceeds the supply, affecting more than 169 industries.