A Shortage of chips

- Everything you need to know -

Fortunately for the food lovers reading, we aren’t talking about McDonalds!

Unfortunately for more than 169 industries, we are discussing the ongoing crisis of the semiconductor chips. This crisis has escalated with the coronavirus pandemic back in 2020, within 2020 sales increased by 6.5% according to the Semiconductor industry association, a rapidly growing demand for chips from tech and automaker businesses all over the world, this problem is still with us today and we want to discuss why.
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What is a semiconductor chip? 

Semiconductors (or microchips) are integrated electronic circuits which are used to regulate the flow of electricity, they enable highly advanced technologies used in nearly every business sector, including transportation, computing and healthcare.

Why is there a shortage? 

1,000,000,000,000 chips are made each year, this equates to around 128 chips per person in the world! So why have we fallen short?

As you can imagine, with the majority of the population isolating in their homes, there has been a massive spike in demand for laptops, mobiles and next gen consoles (yes this is the reason you may have had trouble getting your hands on the PS5). As well as companies upgrading their digital infrastructure to enable for remote working, all of these purchases are driving the demand for these chips through the roof.

GPUs (graphic processing unit) and the increase in cryptocurrency trends have also played a part in the shortage. A crypto market boom occurred at the end of 2020 where GPU prices reached new heights and the rush of crypto miners stockpiling GPUs has meant that there is no stock left for regular consumers in the PC market. 

​Who has it affected? 

A wide variety of industries have been seriously affected by the scarcity of microchips, Apple, Microsoft, Ford, Volkswagen are just a few major companies have all been hit hard by the shortage.

The crisis has been affecting both individuals and businesses, trying to get the newest tech you want and need has been harder than ever since the shortage began, prices have gone up and the supply chain slowed down. The problem is too big to be ignored and due to the pandemic it has really disrupted a lot of industries.

Why can’t they just bump up production? 

Historically, companies have preferred to design their own semiconductors and outsource the manufacturing process to third-party foundries. Given the complexity of producing semiconductors, the market quickly consolidated, this has only left just a handful of companies running the factories in which most of the world's computer chip orders are placed.
Chips are indispensable and are extremely complex to create and because the world runs on these chips and demand has skyrocketed, the outsourced manufacturers have taken an incredible hit due to not being able to physically operate at full capacity in factories.

As well as this, one of the most substantial companies in the world that produces semiconductor chips lives in Taiwan -Taiwan Semiconductor Manufacturing Company (TSMC). This being said, they have suffered with a severe shortage of water which as you can imagine, has had a huge affect on supply.

When will this end? 

These supply chains will continue to be disrupted for at least another year due to backlog within the factories, this crisis is not going away soon – experts say.

A lot of CEO’s have made it clear that they do not see many changes within the next year, The CEO of chipmaker STMicroelectronics, Jean-Marc Chery, explained that the shortage will likely last at least two years. “Things will improve in 2022 gradually,” Chery said, “but we will return to a normal situation … not before the first half of 2023.”
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So, from the information we have to go from, the chip shortage crisis is still a major problem within the major industries including tech and transportation, but we do have hope that things will begin to look a bit more normal coming into the next year/or two. Until this time Total IT among many other businesses will continue to provide the best service with the tools available.

Author

Rebecca Boff
​Marketing Coordinator