Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Why is there a chip shortage?

Why is there a chip shortage?

The big chip crunch is really biting now, leaving even the most unexpected industries in crisis.

The tech industry is at a crunch point.

Today, millions of products - cars, washing machines, smartphones, and more - rely on computer chips, also known as semiconductors.

And right now, there just aren't enough of them to meet industry demand. As a result, many popular products are in short supply.

It has become almost impossible to buy a PS5 games console. Toyota, Ford and Volvo have had to either slow or temporarily halt production at their factories. Smartphone makers are feeling the pinch too, with Apple warning that the shortage could affect iPhone sales.

Even companies that wouldn't necessarily be associated with computer chips haven't been spared, such as CSSI international, a US firm that makes dog-grooming machines, is feeling the effects.

Some shoppers have already noticed these problems. Sales of used-cars are up, for instance, because new vehicles, often packed with thousands of individual chips, are in short supply.

Kris Halpin, a musician based in North Warwickshire, is one of many who have experienced disappointment. Mr Halpin has cerebral palsy and leases a car through the Motability scheme.

The chip shortage has delayed a new car for musician Kris Halpin


His current lease ends in October and under the rules of the scheme he must replace his car at that time. However, his local dealership has told him that the car he ordered has been delayed until January next year at the earliest.

"As a disabled person I am really, really reliant on my car," says Mr Halpin, who uses a wheelchair. "Where I live, I literally couldn't get beyond my drive without my car."

Thankfully, Mr Halpin says that Motability agreed to extend the lease and insurance on his current car until the new one arrives.

In the coming months and, particularly over Christmas, it's possible that even more products will fall foul of the shortage.

So, what is going on?

The chips that are in short supply perform various functions in modern products, and there are often more than one in a single device.

Piotr Esden-Tempski is the founder and owner of 1bitsquared, a US-based firm that specialises in electronics hardware. He has orders on his books for several thousand electronics interface boards, which allow students and makers to connect various appliances to their computers.

Companies like 1bitsquared face a 12-month wait for some components

But Mr Esden-Tempski's suppliers say that some of the components he needs containing semiconductors will not be available for 12 months or more.

"You cannot just assemble it and miss one part, it won't work," he says.

This situation has been developing for years, not just months.

Koray Köse, an analyst at Gartner, says that among the pressures facing the chip industry prior to the pandemic were the rise of 5G, which increased demand, and the decision by the US to prevent the sale of semiconductors and other technology to Huawei. Chip makers outside the US were quickly flooded with orders from the Chinese firm.

Other, less obvious, manufacturing complexities have also hampered the supply of certain components.

For example, there are two main approaches to chip production right now: using 200mm or 300mm wafers. This refers to the diameter of the circular silicon wafer that gets split into lots of tiny chips.

The larger wafers are more expensive and are often used for more advanced devices.

But there's been a boom in demand for lower cost chips, which are embedded in an ever-wider variety of consumer products, meaning the older, 200mm technology is more sought after than ever.

Industry news site Semiconductor Engineering highlighted the risk of a chip shortage, partly due to a lack of 200mm manufacturing equipment, back in February 2020.

As the pandemic unfolded, early signs of fluctuating demand led to stockpiling and advance ordering of chips by some tech firms, which left others struggling to acquire the components.

People working from home have needed laptops, tablets and webcams to help them do their jobs, and chip factories did close during lockdowns.

At times consumers have struggled to buy the devices they want, though manufacturers have so far been able to catch up with demand eventually.

A winter storm in Texas shutdown semiconductor factories


Mr Köse says, however, that the pandemic was not the sole cause of the chip shortage: "That was probably just the last drop in the bucket."

More recently, bad luck has exacerbated the problem. An atrocious winter storm in Texas shutdown semiconductor factories, and a fire at a plant in Japan caused similar delays.

Logistical headaches are compounding the situation. Oliver Chapman, chief executive of OCI, a global supply chain partner, says that for many years the cost of shipping was not of great concern for many tech firms because their products are relatively small, and suppliers could fit lots of them inside a single 40ft container.

But the cost of moving shipping containers around the world has ballooned because of sudden shifts in demand during the pandemic. It is accompanied by a rise in air freight fees and the lorry driver shortage in Europe.

Sending a single 40ft container from Asia to Europe currently costs $17,000 (£12,480), says George Griffiths, editor of global container markets at S&P Global Platts.

That's a greater than ten-fold increase compared to a year ago, when it cost around $1,500 (£1,101).

Chip makers are responding to sustained demand by increasing capacity but that takes time, says Mr Köse, not least because semiconductor factories cost billions of dollars to build. "That is not going to be solved by this Christmas and I find it hard to believe it will be solved by the next Black Friday [November 2022]," he says.

Shipping costs ballooned during the pandemic

Bosses at the tech giants appear sharply aware of this. The chief executives of Intel and IBM have both said recently that the chip shortage could last two years.

Seda Memik, professor of electrical and computer engineering, and computer science, at Northwestern University, agrees: "It will take multiple years to accomplish… a better balance." She also says that the pace of demand for chips has been rising so strongly that a shortage was, at some point, "inevitable".

Establishing new chip factories is difficult to do quickly, she adds: "It's extremely expensive and requires a well-trained workforce." It's a potential spanner in the works for those who advocate "re-shoring" - relocating chip fabrication to a wider variety of countries, including those in the West, in order to ease the pressure on global supply chains.

Making high-end computer chips is extremely difficult

Mr Chapman isn't convinced that the market is up for grabs. He argues that Asia-based chip makers, such as those in Taiwan, China and South Korea, are already racing to meet demand, and will likely continue to dominate in the future.

Mr Köse says that consumers aren't likely to notice price rises or widespread shortages of tech products this Christmas. Certain in-demand devices, such as games consoles, could become hard to get, with customers having to wait a few months for the item they want. However, he doesn't expect interminable delays.

The bottom line is: the pandemic accelerated an already precarious situation for chip makers - we're in the middle of a tech boom, supply can't quite keep up - and it won't get sorted out overnight.

It means that all sorts of people, including those seeking a new car like Mr Halpin, could continue to experience delays and disappointment for months to come.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Senate Scrutinises AI-Driven Personalised Pricing
Spain Seeks Mainland Transfers for 1,100 Children Stranded in Ceuta
Spain and Morocco Trade Blame After 72,000 Migrants Enter Ceuta
AI Is Remaking the US Economy, From GDP Growth to iPhone Prices
Europe’s Heat and Drought Are Now Disrupting Power, Shipping and Tourism
Europe’s Drying Rivers Trigger Power Cuts, Factory Shutdowns and Wildfire Emergencies
Record-Low Danube Forces Nuclear Cuts and Emergency Power Curbs
Danube Drought Forces Hungary’s Paks Nuclear Plant Into Full Shutdown
Ceuta Death Toll Rises as Spain and Europe Clash Over Border Response
Valued at $109 Million: F-35B Fighter Jet Crashes in Southern California
Record-Low Danube Exposes Probable Mammoth Remains in Bulgaria
US Says It Has Carried Out Heavy Strikes on Iran After Attempted Attacks on Its Forces
The AI User Nightmare: Private Claude Conversations Leaked to the Internet
Over 24 Hours in the Air: Qantas Airbus Completes Record-Breaking Test Flight
Massive Wildfires Ravage Southern Europe: Fatalities in Greece and Evacuations Across France, Spain, and Turkey
Nvidia Reportedly Takes Vast Texas Data-Centre Lease to Underwrite AI Expansion
FIFA’s Private-Investment Plan for World Cup Rights Draws European Revolt
Apple Briefly Crosses Five Trillion Dollar Valuation as Investors Retreat From AI Bets
Fresh Heatwave Threatens to Rekindle France’s Historic Wildfire Crisis
Following OpenAI's Cyberattack: 'Most Companies Still Do Not Understand What Is Coming'
OpenAI Sued After ChatGPT Allegedly Discouraged Emergency Care Before Near-Fatal Embolism
Miliband Sets Climate and International Law at Centre of UK Diplomacy
Czech Central Bank Governor Rejects Early Euro Entry and Rate-Cut Pressure
Trump Readies New Tariffs as Temporary Global Levy Nears Expiry
Vivienne Westwood Casts Cicciolina, 74, in Its New Autumn Campaign
Dejavu: Germany’s Military Expansion Reshapes Europe’s Strategic Balance With France
Morgan Stanley Builds a Wall Street Lead in AI Infrastructure Finance
High Prices Push Coffee Drinkers Toward Whole Beans and Home Brewing
Trump Draws Boos and Podium Scrutiny at Spain’s World Cup Triumph
Brilliant move: Péter Magyar Moves to Nominate Chess Grandmaster Judit Polgár as Hungary’s President
Spain Defeats Argentina in Extra Time to Win Second World Cup
Current AI Seeks to Build an Open Global AI Infrastructure Outside Big Tech Control
Germany’s Economic Malaise Reopens the Sunday Shopping Debate
Proposed U.S.-Saudi Nuclear Pact Could Permit Limited Uranium Enrichment Under International Safeguards
Netherlands Declares Water Shortage Emergency After Drought Pushes Rivers to Historic Lows
Why Kentucky Fried Chicken Became KFC—and Why the False Explanations Persist
Ukrainian Drones Strike Wildberries Warehouses Deep Inside Russia
Reported CIA Mission Helped Clear the UAE’s Path to Advanced US AI Chips
Artificial Intelligence Capital Fuels Markets While Governments and Regulators Face Mounting Strategic Tests
China’s Moonshot’s Kimi K3 Narrows the Gap With Anthropic Through Scale, Openness and Lower Cost
The Ledger Will Not Trust on Faith
Trump Administration Pressures Banks to Restrict Financial Access for Undocumented Immigrants
Passenger Bound for Germany Refused to Sit Beside a Woman on a Plane — Then Slapped a Flight Attendant
Ukraine’s Leadership Rift Spills Into the Streets as Protesters Target Army Chief
Ukrainian Drone Barrage Kills Eight and Strikes Russian Logistics Network
The Ten World Cup Finals That Defined Football History
Smartphones Are Getting More Expensive, Sales Are Collapsing, and Even Apple Admits: "Prices Will Rise"
The Monaco Bombing Has Become a Test of Ukraine’s Intelligence Accountability
Leadership Change and Strategic Rivalry Redraw the Political Map
The AI Race Enters Its Infrastructure Era
×