Global Semiconductor Shortage

Global Semiconductor Shortage
Car assembly lineAs if the pandemic was not enough the world is now facing a global semiconductor shortage. Before we can begin to break down why the shortage exists and how it will end up affecting you it is important to know exactly what semiconductors are. In simple terms they are computer chips, little integrated logic or memory circuits printed onto non conductive silicon. With modern transistor sizes reaching into the 5 nanometer range, 5 billionths of a meter, semiconductor manufacturing is one of the most complicated hightech processes on earth.

So, how did the shortage begin? Just as many factories globally shutdown production over Coronavirus concerns, there was a sizable uptick in demand for consumer electronics. Laptops and computers became must haves for many, and entertainment devices like TVs and game consoles became key to keeping entertained and connected to friends. All of this has caused the semiconductor supply chain to be strained by high demand and low supply.

Okay but how does this shortage affect me? As there is only a certain amount of production, higher volume and higher profit parts will get priority allocation, meaning some of your favorite products may have production delays. One area being hit hard by the shortage is cars. Unfortunately the medium-low power chips that power the infotainment and engine management programs of modern cars are just not a priority for chipmakers. Ford, GM, and Toyota have all announced that they will begin cutting back production in many of their factories, due to an inability to source the chips they need. Ford announced that they are expecting upwards of a $2.5bn hit to profits this year. Samsung, who is also the world's second largest chip maker, announced that they will be delaying the launch of their upcoming smartphones, illustrating just how bad the problem is when Samsung, who makes many of their own chips, can't source enough. Also those excited for the iPhone 13 should be expecting higher prices and a later than expected launch.

What can be done to fix this problem? Sadly not much, building new semiconductor manufacturing facilities can take anywhere from 3 to 5 years. It is expected that these shortages will last anywhere from late 2021 to early 2022. With bipartisan support the Biden administration signed an executive order that includes emergency funding and a 100 day review of the semiconductor supply chain, hopefully preventing future shortages like this. So, if you were planning on purchasing a laptop, phone, camera, game console, car, smart watch, or really anything else with silicon inside within the next 6 months, good luck.

By: Joseph Shull