Paris:
The shortage of semiconductors has had an impact on the global economy, squeezing the supply of everything from cars to headphones.
The lack of chips exposes the modern world’s reliance on these tiny components, which are the basic building blocks of computers and allow electronic devices to process data. Why is there a shortage and what can we do?
What does the shortage have to do with the pandemic? ——
The Covid-19 crisis that began in early 2020 has triggered a global consumer frenzy of electronic products-from the addition of monitors when people are eager to set up home offices, to TVs and game consoles used to overcome lock-in boredom.
Temporary factory closures due to the pandemic have also put pressure on supplies.
As factories reopened, electronics manufacturers continued to place orders—causing a growing backlog of chips, which may be only a few millimeters long.
The pandemic is not the only factor. In February, a storm temporarily stopped production at several factories in Texas, and a fire broke out in a Japanese factory in March.
The US-China tensions are also part of the story. In August last year, the United States banned foreign companies whose chips use American technology from selling to Chinese technology giant Huawei on the grounds of espionage accusations.
Huawei began hoarding semiconductors before the sanctions took effect, and other companies followed suit, further exacerbating supply tensions.
Which industries are affected?
So far, the automotive industry has been the most obvious victim, and many brands have been forced to slow production in recent months.
As automakers cut production at the beginning of the pandemic, their chip suppliers turned to customers in other industries—namely, manufacturers of electronic products that were in high demand due to the pandemic.
This makes car brands from Volkswagen to Volvo scramble to seize semiconductors because sales are picking up again.
Smartphone manufacturers have been relatively protected because they have existing chip inventories, but they are also beginning to be affected.
Apple CEO Tim Cook warned this week that shortages will hit iPhone and iPad production. Analysts said that smaller mobile phone manufacturers may be more severely affected.
Game consoles such as PlayStation 5 and Xbox Series X have also been in short supply.
Gamers are asking for the chip-driven graphics cards needed to play games so high that they adopt increasingly unusual strategies.
These diehards are watching live broadcasts on YouTube and Twitch, and an alarm will sound every time a card is sold online.
When will this end?
At the same time, governments are eager to increase their chip manufacturing capabilities.
In May of this year, South Korea announced that it would invest US$451 billion to become a semiconductor giant, and the US Senate voted last month to pass a US$52 billion subsidy for chip fabs called “fabs.”
The European Union is seeking to double its share of global chip manufacturing capacity to a 20% market share by 2030.
But factories cannot be started overnight—especially those that make semiconductors, which is a delicate process of laminating chemicals into silicon.
“It takes time to build new capacity—for a new fab, more than 2.5 years—so most of the expansions started now will not increase the available capacity until 2023,” Ondrej, senior partner and co-head of the global semiconductor business Burkacky said. Consulting firm McKinsey.
He added that long-term factors also mean that global demand is in a state of “high-speed growth.” For example, the trend of companies storing data in the cloud requires the establishment of more and more data centers-sites that use a large number of chips.
French-Italian chip maker STMicroelectronics CEO Jean-Marc Chery (Jean-Marc Chery) said that next year’s orders have exceeded his company’s manufacturing capacity.
He said that the industry generally acknowledges that the shortage “will last until the minimum next year.”
Analysts said that continued tightening may lead to consumer price increases.
SEB, a manufacturer of kitchen equipment such as French mixers, has warned that it is being forced to raise prices.