A crisis is looming over the world’s tech sector. It is the crisis of semiconductor chips. These tiny chips are so ingrained in our lives that their shortage has caused a panic in the global market.
Semiconductor chips power everything from TVs and microwaves sitting in our homes to the laptops and mobile phones that we can’t imagine our lives without. And now, the world doesn’t have enough.
So, here’s what causing the global semiconductor chip shortage and how long it might last.
What Is a Semiconductor Chip?
If the software is eating the world, then chips are the teeth.
This is how Kif Leswing from CNBC described semiconductor chips in a recent interview. He’s right.
Semiconductors, also called chips or semis, are the tiny components that silently but diligently power everything from rockets and jets to microwaves and mobile phones. The silicon-based chips were introduced in 1947 in the USA and ushered in a new paradigm of computing.
Previously, computers were built on top of vacuum tubes; we now know them as first-generation computers. A big problem with vacuum-based computers was that they consumed too much electricity, were too large, and would often fail. The ENIAC computer, for instance, would go down every two days.
With the advent of silicon-based semiconductor chips, however, things changed for the better. For the first time, our devices were efficient, small, and reliable. We have come a long way since then.
What’s Causing the Global Semiconductor Chip Shortage?
The Covid-19 pandemic, and the subsequent lockdown, have been considered the biggest culprit for the massive chip scarcity.
When the world went into lockdown in 2020, all major automobile manufacturers predicted a slump in sales. This forced them to cut back on manufacturing. As a by-product, orders for new semiconductor chips were also put on the hold.
What was not taken into consideration during all this, though, was the impact of a year-long lockdown on the consumer psyche and their buying habits.
After being confined to their homes for many months, many consumers either decided to buy new gadgets or upgraded to newer ones for work, education, or entertainment. This resulted in all the major gadget manufacturing companies increasing their semiconductor orders for meeting the increasing market demands.
What’s Being Done About It?
All the existent semiconductor factories are producing chips at their full capacity, but the demand for semiconductor chips has seen such a surge that they are not able to meet their targets.
The obvious response would be to build more factories, right?
Not really. You see, it takes time and billions of dollars to build a single chip manufacturing factory. While building more manufacturing plants would be a good strategy for the future, they won’t do much now.
But there’s hope for the future.
On 24th February 2021, the Biden administration signed an executive order to address the global semiconductor shortage.
According to the Semiconductor Association, U.S. chip companies are responsible for 47 percent of semiconductor chip sales, but only 12 percent of those chips are manufactured at home. With the Internet of Things (IoT) and 5G technologies further increasing demand, chips are poised to become even more ingrained in our lives.
The obvious solution here is to build independent semiconductor chip manufacturing plants to avoid a chip shortage like this again.
When Will the Global Chip Shortage End?
According to semiconductor industry experts, the shortage does not look like it will ease up anytime soon. It is predicted have an effect on technology manufacturing and hardware prices well into 2021, if not 2022.
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