Companies like General Motors, Apple, Microsoft, Toshiba, and Hewlett-Packer, to quote just a few, are affected by a global chip shortage and it looks like this problem isn't going away until next year - or even later.
What is the Global chip shortage?
Known as the 2020-2021 Global chip shortage, this event refers to a semiconductor chip shortage or in other words, a demand for integrated circuits that greatly exceeds the supply possibilities. This crisis affects over 169 industries and results in longer production times, an important profit decrease for companies, and, in some cases, increased price tags. The production of video games consoles, cars, and electrical devices was amongst the most impacted.
Examples of affected automaker companies include Tesla, which is reportedly experiencing difficulties securing chips for airbags and seatbelts, and General Motors, which had to halt the production of some pickup truck plants. Consumer tech is no exception, as Sony had to warn customers that a large supply of PlayStation 5 won't be possible until 2022 or later, and Xiaomi had to delay the shipment of a new model in India.
What is the chip shortage 2021 cause?
The Chip Shortage has various explanations.
The first and most obvious reason is the COVID-19 pandemic. On one hand, many countries experienced a lockdown and companies had to stop or slow down chip production. On the other hand, new home office working conditions and increased home time led to a growth of 26.1% of traditional computer sales during the last quarter of 2020 - and thus, to the demand exceeding the production. In addition, the pandemic caused a fluctuating demand from the industry: some tech companies overstocked chips in advance, while others couldn't acquire any. Many others, especially car companies, canceled chip orders, fearing that the industry was going to take a hit, so manufacturers adapted to the situation by switching their production to chips for consumer products.
Unfortunately, things didn't stop there: a winter storm pushed Texas semiconductor factories to shut down, while a fire in Japan's Renesas plant caused delays - and this is where nearly one-third of the car chips used worldwide are produced.
Another cause could be the trade war between the United States and China. Restrictions placed on Semiconductor Manufacturing International Corporation (SMIC) pushed companies to rely on Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Samsung but those manufacturers had already been working at their full capacity.
When will the Chip shortage end?
Although there is no consensus on this question, many CEOs and analysts seem to agree that the shortage will continue throughout 2022, even though production is already on the right track. For example, President Joe Biden is asking for a $50 billion investment in American chip manufacturing.
An estimation from the CEOs of Intel (Patrick Gelsinger) and IBM (Arvind Krishna) states that the shortage could last at least two years.
Building new factories may seem like a quick solution. However, it is important to note that this is not as simple as it sounds for two reasons: firstly, this is a long process that takes years, and secondly, manufacturing chips requires a highly specialized workforce that will need training.
What is the conclusion?
The global chip shortage (2021) is defined by a demand that exceeds the production possibilities. It is the result of the interaction of various factors including less than optimal planning and decisions from the companies, a halt in production during the COVID-19 pandemic, companies switching to chips for customer tech, an increased customer demand, natural disasters, and incidents, among others.