The chips are down: why there’s a semiconductor shortage


A new type of 300mm wafer with semiconductor chips and finished microchips of the semiconductor German manufacturer Bosch in Dresden, Germany. The dearth of chips has exposed the modern world’s reliance on these miniscule components, the basic building blocks of computers which allow electronic devices to process data. — AFP

PARIS: A shortage of semiconductors has sent shockwaves through the global economy, squeezing supplies of everything from cars to headphones.

The dearth of chips has exposed the modern world’s reliance on these miniscule components, the basic building blocks of computers which allow electronic devices to process data. Why is the shortage happening, and what can be done about it?

How is the shortage linked to the pandemic?

The start of the Covid-19 crisis in early 2020 prompted a global spending spree on electronic items – from extra monitors as people rushed to set up home offices, to televisions and games consoles for beating lockdown boredom.

Temporary factory closures due to the pandemic also put pressure on supplies.

And as plants reopened, electronic goods producers continued to place orders – creating an ever-increasing backlog for the chips, which can be just a fraction of a millimetre long.

The pandemic isn’t the only factor. A storm briefly halted production at several plants in Texas in February, and a fire ripped through a Japanese factory in March.

US-China tensions are also part of the story. Last August, the US banned foreign companies whose chips use American technology from selling to Chinese tech giant Huawei, over espionage allegations.

Huawei began stockpiling semiconductors ahead of the sanctions coming into effect, and other companies followed their lead, further straining supplies.

Which industries have been hit?

The car industry has been the most visible victim so far, with many brands forced to slow their output in recent months.

As automakers slashed production early in the pandemic, their chip suppliers turned to clients from other sectors – namely the makers of electronic goods in high demand due to the pandemic.

That has left car brands, from Volkswagen to Volvo, scrambling to get hold of semiconductors now that sales are revving up again.

Smartphone makers had been relatively protected so far as they had existing stockpiles of chips, but they too are starting to suffer.

Apple CEO Tim Cook warned this week that the shortages are set to hit the production of iPhones and iPads. Smaller phone-makers are likely to be worse affected, analysts say.

Games consoles like the PlayStation 5 and Xbox Series X have also been in short supply.

So great is the clamour among gamers to get hold of chip-powered graphic cards needed for their playing, that they have been resorting to increasingly unusual strategies.

The die-hards are tuning into livestreams on YouTube and Twitch, which ring an alarm every time a card is listed for sale online.

When will this end?

Governments are hurrying to boost their chip-making capacities, meanwhile.

In May, South Korea announced a whopping US$451bil (RM1.90 trillion) investment in its bid to become a semiconductor giant, while the US Senate last month voted through US$52bil (RM219.57bil) in subsidies for chip plants, known as “fabs”.

The European Union is seeking to double its share of global chip-manufacturing capacity to 20% of the market by 2030.

But factories cannot open overnight – particularly those that make semiconductors, a delicate process that involves pressing layers of chemicals into silicon.

“Building new capacity takes time – for a new fab, more than 2.5 years – so most expansions that are starting now will not increase the available capacity until 2023,” said Ondrej Burkacky, senior partner and co-leader of the global semiconductors practice at consultancy McKinsey.

He added that long-term factors also meant global demand was in “hyper growth”, such as the trend towards companies storing their data in the cloud, requiring more and more datacentres to be built – sites that use huge quantities of chips.

Jean-Marc Chery, CEO of Franco-Italian chip-maker STMicroelectronics, said orders for next year have already outstripped his company’s manufacturing capacities.

There is a broad acknowledgement within the industry that the shortage “will last up to next year minimum”, he said.

Analysts say the continuing squeeze could lead to higher prices for consumers.

SEB, a French maker of kitchen equipment such as blenders, has already warned that it is being forced to hike its prices. – AFP

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 46
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Semiconductors , chips

   

Next In Tech News

Intel breaks ground on $20 billion Arizona plants as U.S. chip factory race heats up
Nexi exec says group interested in digital euro, no formal talks with ECB
Brazil sets 5G mobile auction for Nov 4, says minister
Vice President Harris announces $1.2 billion investments to help school children afford broadband
Mercedes-Benz customers waiting more than a year for cars due to chip shortage - CEO in FAZ
Exclusive-Huawei CFO Meng expected to resolve U.S. charges in Brooklyn federal court - source
New semiconductor plants will end global auto chip shortage next year -Tesla's Musk
India's Silicon Valley state seeks to ban online gaming, worrying booming industry
Google, India antitrust watchdog tussle in court over probe leak
Wind turbine maker plans first big Chinese-built plant in Europe

Stories You'll Enjoy


Vouchers