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Why the Foundation of Tech is at Risk: The Global Chip Shortage

Phil Smith by Phil Smith
November 28, 2022
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Why the Foundation of Tech is at Risk : The Global Chip Shortage

In the past year there has been news of how a lack of chips can actually hurt industries. A global shortage of computer chips. Continues hampering the auto  industry and creating vehicle shortages. What began with temporary manufacturing  disruptions at the onset of the COVID-19 pandemic has led to a series of supply breakdowns across  multiple industries in 2021. Specifically, demand is now high for a variety of goods that  use chips, and this gap in supply and demand has become known as the global chip shortage.  Before we dive into the causes of the shortage, we must know…

What even is a Chip?

Also called an integrated  circuit, IC, or computer chip, a modern chip is a network of electronic circuits printed  on and embedded in a flat piece of silicon. Silicon is a semiconductor, meaning it  can carry an electrical current between highly conductive elements like metals and  less conductive materials like ceramics. There is no “the” chip, in fact there’s different types of chips. The production of chips typically starts with silicon, which is made out of crystals. And on top of that,  you basically introduce the structures that make out of the silicon a particular chip,  be it a logic chip that does calculations, chips that do memory operations,  convert voltages, images for cameras. That’s a lot of different types of  chips, but they’re made in a similar way. Think of it like thin layers placed on top  of each other in a highly precise manner. Just imagine cutting and stacking thin sheets of  paper at a scale of mere billionths of a meter. Your scissors basically  need to be able to cut in a nanometer range. And the next piece of paper  you’ll put on top of that, again, in a nanometer range, you have to position  it exactly correctly above the one before. 

Effects of the Chip Shortage has on Industries

We’ve seen the chip shortage hit many  industries from consumer electronics to cars to computer parts. In a nutshell, demand for  products with chips has risen since the start of the pandemic, and chip manufacturers  have been struggling to meet this demand. As a result, customers that can’t get the  products they want either have to wait or pay more. These buyers have waited hours for a  chance to buy a computer component called a GPU. They’re harder to get because of the shortage. Majority of consumers are eager to buy GPUs for a multitude of reasons but once stocks arrive, it sells out as soon as it comes out, but yet they still travel, waiting to see if it’s there. Early mornings and late nights. That’s  the sacrifice that most people here are willing to make. That should tell you everything  you need to know about the shortages. GPUs, or graphics processing units,  are computer components that render visuals. They are great for gaming and  solving complex computations. They also incorporate sophisticated chips to  perform these tasks. 

Why is it so hard to keep up with demand ?

You would think increased demand would lead manufacturers to start up more  factories. Well, it’s not that easy either. The factories where chips are manufactured can  take years and billions of dollars to build. It’s not about the construction cost  that much, that is typically less than 20%, but the semiconductor tools that  you need to manufacture these chips, these are the ones that account for  80%-plus of the cost. You could build a much smaller factory, surely, but  it would not be financially viable. Further complicating  things, a single company, TSMC, makes roughly a quarter of the world’s chips  and manufacturers from two Asian countries, South Korea and Taiwan make the majority of chips, but disruptions in one region or with just one  manufacturer can impact thousands of products. It is a real global industry. Nobody  did think a lot about, for example, having something based in the US to produce only  for the US. And then the pandemic came, we needed another laptop. We needed  another camera and microphone. The demand for semiconductors actually  almost doubled within one year. So there was a shift in what we  buy increasing demand for some products, but beyond just chips, we’re seeing shipping and  supply chain issues in everything from lumber to metals like steel and aluminum, and shipping  internationally now takes longer and has become more expensive since 2020. And this intensified  after a massive blockage in the Suez Canal in March was followed by many other port backups.  As of October 2021, there were more than 100 shipping containers off the California coast just  waiting in line to be offloaded, and in the US there’s a shortage of truck drivers at the moment,  further aggravating the problem at the ports. 

How long will this be a problem ?

Fortunately,  we’re already seeing some improvements. What you can do in the  short-term is just try to really, really optimize your operations  to just get more output. Other solutions are  prioritizing chips based on demand,  and altering product designs  to use the available chips, but experts believe more production  facilities will be needed in the future. Artificial intelligence  needs semiconductors, right?  Smart things. I would call it the decade  of semiconductors is now in front of us.

References
Baraniuk, B. C. (2021, August 27). Why is there a chip shortage? BBC News. https://www.bbc.com/news/business-58230388


J.P. Morgan Chase. (2022, August 11). How to begin building a credit history. https://www.jpmorgan.com/insights/research/supply-chain-chip-shortage


Tong, G. C. (2022, July 20). Global chip shortage is not over and the slowdown is “going to bite,” analyst says. CNBC.https://www.cnbc.com/2022/07/20/global-chip-shortage-continues-amid-inflation-rising-rates-and-war-idc.html


Why The Chips Are Down: Explaining the Global Chip Shortage | Jabil. (n.d.). Jabil.com. https://www.jabil.com/blog/global-chip-shortages.html

Source: Mark Jason Copita & Josh Andre Elisan
Via: Mark Jason Copita & Josh Andre Elisan
Tags: Technology
Phil Smith

Phil Smith

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