Worldwide Computer Chip Shortage

The days when microchips were only found in computers are long gone. These days you can find them in everything from cars to kettles, televisions to toasters. Our machines are becoming smarter and smarter, and with the advent of the Internet of Things, this trend will only continue. The problem is there is currently a worldwide shortage of the chips that power these devices, and that shortage is affecting everything from car manufacturing to national security.

What is the problem?

This issue lies in a lack of manufacturing capacity. Despite the fact that chips can be found in all kinds of equipment, more than half of all chips come from a single company – TSMC in Taiwan. A further fifth are made by South Korean company Samsung, which means that three out of every four chips are made by just two companies. Since it is incredibly expensive to set up and run these factories, they are generally working at full capacity most of the time, and so they have limited scope for increasing production to meet surges in demand.

A changing world

The dramatic global changes over the last couple of years have seen a surge in demand for consumer electronics and the chips that power them. Rising sales of TV and entertainment systems during lockdown, as well as laptops and home computers for remote working, have put a huge strain on the supply lines. Those same changes have also made demand hard to predict, as the auto industry found to its cost.

The chips are down for car manufacturers

As demand slowed, the motor industry bet on a slump in new car sales by cancelling chip orders. Unfortunately, that bet lost more than the kind of chips you get at Unibet PA casino; they lost the chips they needed to increase production when demand suddenly surged late last year. This has led to production lines being closed and workers being laid off as the car companies struggle to get the chips they need. Some sources estimate the issue will cost the auto industry as much as $60bn.

Why can’t we just make more chips?

Unfortunately, it’s not that simple. Microchip manufacturing requires expensive, high-tech equipment, including specialist clean rooms. A new plant can cost as much as $20bn and take many months, if not years, to build. For now, we have to make do with current capacity and that means some industries are losing out. Naturally, computer manufacturers are the chip makers’ biggest consumers, and so they are getting priority for the stock that is available, leaving industries like car making out in the cold.

How long will the shortage last?

With no new capacity on the immediate horizon, experts predict that the current chip shortage could last as long as two years or more. Even priority customers, such as Apple, are struggling. Their Chief Executive, Tim Cook, predicts that sales of the new iMacs will be ‘supply gated, not demand gated’, adding that it is ‘very, very difficult to predict when the situation might improve’.

Future solutions

Having been caught out by the shortage of ships, and the dominance of so few manufacturers, world leaders are taking things into their own hands. The EU has committed to a target of making 20% of its own chips by the end of the decade, while in the US, congress has recently passed $250bn in funding for technology research and development to decrease America’s dependence on foreign chip imports.

These are impressive responses, but neither will do much for companies who are struggling to find supplies right now. Things will only get worse, both for manufacturers and for consumers, before they get better, with everything from new cars to Apple’s new M1 chipped iMacs predicted to be in short supply by the end of this year.