Why are there no chips?

  • 4 minutes read

You could say that in the world of electronics this is one of the biggest problems in recent times. Restrictions have been in place for over a year, production has slowed and there are long lines for many electronic devices. Whether it‘s phones, computers, games consoles, home appliances or even cars, most of this will not be the same as in the past, or even in the future.

At first thought, it looks like the Covid-19 pandemic is once again to blame. It’s true that it has a certain contribution to current market situation. Many factories have had to stop or at least reduce production. On the other hand, many of the electronics were in even higher demand; employees switched to home-office and children to remote learning, which increased the need for laptops, tablets and other electronic devices. Even the need to be entertained has affected the market with increased interest for gaming consoles and computers. But is it really all Covid’s fault?

 

What actually happened?

Well, we already know that the pandemic had a lot to do with it. Another problem is the disruption of transport between countries, because a large number of supplies are delayed in transit. A large impact was the sudden blockage of the Suez Canal by the giant container ship Evergreen in March. This canal connects the Mediterranean and the Red Sea which carries almost 12% of world trade, the disruption made it impossible for all ships to pass through it for several days.

Additionally, there were miscalculations in forecasting the restart of production, especially of cars. Automotive companies drastically reduced chip orders with the onset of the coronavirus, underestimating the speed at which car sales would recover. By the end of the year, carmakers were trying to regain orders, but chipmakers were and remain busy supplying computer and smartphone manufacturers.

To make matters worse, natural disasters have also struck. A sudden February cold spell in Texas, USA, resulted in power outages that put several chip factories out of business. For example, Samsung’s factory did not restart operations until the end of March. Unfortunately, the Japanese factory of Renesas Electronics, a major supplier of automotive chips, also suffered a devastating fire in March.

 

However, it’s possible to take advantage of the situation

For example, if you are into investments, according to some analysts, there is a huge opportunity here. If you think about it, it makes sense that most semiconductor manufacturers will want to meet the shortage and expand their production to maximise profits. This is certainly not investment advice, but rather a call to think about whether it would make sense to invest in one of the many companies involved. Whether it is the chip manufacturers and suppliers themselves, or even companies that produce, for example, graphics cards or processors.

 

How much longer will it take?

In addition to companies, world governments are also trying to combat the chip shortage. US President Joe Biden has recommended that Congress spend at least $50 billion on US infrastructure aimed at semiconductor manufacturing. He wants to achieve at least partial US self-sufficiency. In the current situation, America produces only 10% of its consumption. China and the European Union also set a similar target in February.

However, all of these plans will only become apparent in the next few years, which is the main reason why the world is likely to cope with chip shortages for several years to come. In April, consultancy Roland Berger predicted that these problems will persist well beyond 2021. It also warned that demand for chips from the automotive industry will increase significantly by 2025 as a result of vehicle electrification and driving automation.

 

Conclusion

Some products are still available, albeit in smaller quantities. When buying a laptop, desktop PC or accessories there is still something to be bought. It is possible that demand will even decrease over time. For graphics cards, it is still bleak for now due to cryptocurrency mining. Currently, shops are able to offer a few older GPU products. The mid-range and higher-end models are unfortunately missing completely, and if by chance there are some high end GPU products available, they will literally disappear within minutes.

The global chip shortage is sure to continue for some time. The rebound will be more challenging given the ongoing pandemic. Large manufacturing plants must gradually adapt to demand and expand production capacity, for example, by adding more production lines. It is hard to say where this will have a greater or lesser impact. So the next time you plan to buy an electronic device and see items out of stock, don’t blame the local shop, but consider it a much larger global problem that needs to be solved.

 

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