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Why Are Semiconductor Chips in Short Supply & Can It Affect You?

What’s causing this scarcity and why should you care? Here’s everything we know.

Updated
Tech and Auto
3 min read
Businesses and consumers across the globe are facing shortage in the supply of semiconductor microchips.
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If you’re wondering what caused a delay in the release of iPhone 12 and why finding the latest consoles for PlayStation 5 has been so difficult, blame it on the global semiconductor chip shortage.

With the onset of coronavirus pandemic, higher demand for mobile phones, laptops and the usage of internet has increased the requirement for semiconductor chips. From non availability of consoles to delayed car deliveries, businesses across the globe are facing shortage in the supply of semiconductor microchips.

South Korean tech giant Samsung Electronics , one of the world’s largest makers of chips and consumers electronics said that the world is grappling with the fallout from a ‘serious imbalance’ in semiconductors globally.

Earlier, in February US President Joe Biden pledged to address the shortage which had forced US automakers and other manufacturers to cut production and alarmed the White House and members of Congress.

But, what’s causing this scarcity and why should you care? Here’s everything we know.

Why Are Semiconductor Chips in Short Supply & Can It Affect You?

  1. 1. What Are Semiconductor Chips?

    Semiconductors are materials like silicon which can conduct electricity. These are also known as chips, semis, and can be found in electronic devices such as computers, smartphones,appliances,gaming hardware and medical equipment.

    These devices find widespread use in almost all industries especially in the automobile industry.

    Expand
  2. 2. Why Is There A Shortage?

    During the pandemic, millions of consumers stocked up on laptops, gaming consoles and electronic products.

    According to market tracker International Data Corp Sales of laptop and desktop computers exceeded 302 million in 2020, a 13 percent increase from the year before and the most since 2014.

    The automobile industry was shut for a few months but as the restrictions were lifted, the car sales especially in China began to increase. However, the production of chips was still low, causing an imbalance in the supply and demand ratio which triggered a global chip crisis.

    This shortage further spread to a range of other consumer electronics, including smartphones, refrigerators and microwaves.

    Expand
  3. 3. How Is Automobile Industry Dealing With The Shortage?

    The automobile industry has been hit bad with the shortage. This crisis has forced car manufacturers such as Motors Co, Ford Motor Co, Volkswagen AG, Surbaru Corp, Toyota Motor Corp and Nissan Motors to scale down their productions .

    According to data firm IHS Markit, this shortage could impact 1.3 million units of global light vehicle production in the first quarter.

    Meanwhile,Samsung Electronics had to shut down its factories temporarily owing it to the crisis.

    Expand
  4. 4. Will You be Able to Buy 5G devices?

    According to Reuters, the introduction of 5G phones and laptops have picked up faster than expected.

    Chip manufacturers such as Qualcomm and Foxconn whose chips feature in Samsung phones and Apple devices respectively have warned of the chip shortage affecting supply chains to clients.This means that 5G devices will be difficult to buy owing to global chip shortage.

    The report by Reuters further suggests that US semiconductor companies account for 47 percent of global chip sales, but only 12 percent of global manufacturing is done in the United States.

    Expand
  5. 5. Why Should You Care?

    If the global shortage continues to increase, this means that you won’t be able to buy popular products such as laptops, iPhone devices, PlayStation consoles and cars too.

    Recently, Samsung decided to shut down its factories amid the global crisis. This could mean that prices of tech gadgets could go even higher and will be heavy on your pockets.

    Expand
  6. 6. When Will The Shortage be Resolved?

    US President Joe Biden has intervened to resolve this issue and has sought $37 billion in funding for legislation to supercharge chip manufacturing in the country.

    Meanwhile, semiconductor industries have also rammed up their production process but has warned that the increase won’t be rampant.

    Intel, has recently announced to invest $20 billion (roughly Rs. 1.4 lakh crores) in two new factories in Arizona. However, this does not mean that the factories can meet the current demand, experts say that the scarcity will last for more than a year from now at least.

    Expand
  7. 7. Is the Chip Shortage Benefitting Electronic Industries?

    With the demand of consumer electronics rising Neil Campling, an analyst at Mirabaud Securities told The Guardian,“this gives companies the power to raise prices and pass on higher costs”.

    Lenovo Group also said that its profit margins took a hit after the global chip shortage. Demand for laptops have increased because of purchases by people working at home, which has also led to the doubling of stock prices since August.

    (At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

    Expand

What Are Semiconductor Chips?

Semiconductors are materials like silicon which can conduct electricity. These are also known as chips, semis, and can be found in electronic devices such as computers, smartphones,appliances,gaming hardware and medical equipment.

These devices find widespread use in almost all industries especially in the automobile industry.

Why Is There A Shortage?

During the pandemic, millions of consumers stocked up on laptops, gaming consoles and electronic products.

According to market tracker International Data Corp Sales of laptop and desktop computers exceeded 302 million in 2020, a 13 percent increase from the year before and the most since 2014.

The automobile industry was shut for a few months but as the restrictions were lifted, the car sales especially in China began to increase. However, the production of chips was still low, causing an imbalance in the supply and demand ratio which triggered a global chip crisis.

This shortage further spread to a range of other consumer electronics, including smartphones, refrigerators and microwaves.

ADVERTISEMENT

How Is Automobile Industry Dealing With The Shortage?

The automobile industry has been hit bad with the shortage. This crisis has forced car manufacturers such as Motors Co, Ford Motor Co, Volkswagen AG, Surbaru Corp, Toyota Motor Corp and Nissan Motors to scale down their productions .

According to data firm IHS Markit, this shortage could impact 1.3 million units of global light vehicle production in the first quarter.

Meanwhile,Samsung Electronics had to shut down its factories temporarily owing it to the crisis.

ADVERTISEMENT

Will You be Able to Buy 5G devices?

According to Reuters, the introduction of 5G phones and laptops have picked up faster than expected.

Chip manufacturers such as Qualcomm and Foxconn whose chips feature in Samsung phones and Apple devices respectively have warned of the chip shortage affecting supply chains to clients.This means that 5G devices will be difficult to buy owing to global chip shortage.

The report by Reuters further suggests that US semiconductor companies account for 47 percent of global chip sales, but only 12 percent of global manufacturing is done in the United States.

ADVERTISEMENT

Why Should You Care?

If the global shortage continues to increase, this means that you won’t be able to buy popular products such as laptops, iPhone devices, PlayStation consoles and cars too.

Recently, Samsung decided to shut down its factories amid the global crisis. This could mean that prices of tech gadgets could go even higher and will be heavy on your pockets.

ADVERTISEMENT

When Will The Shortage be Resolved?

US President Joe Biden has intervened to resolve this issue and has sought $37 billion in funding for legislation to supercharge chip manufacturing in the country.

Meanwhile, semiconductor industries have also rammed up their production process but has warned that the increase won’t be rampant.

Intel, has recently announced to invest $20 billion (roughly Rs. 1.4 lakh crores) in two new factories in Arizona. However, this does not mean that the factories can meet the current demand, experts say that the scarcity will last for more than a year from now at least.

ADVERTISEMENT

Is the Chip Shortage Benefitting Electronic Industries?

With the demand of consumer electronics rising Neil Campling, an analyst at Mirabaud Securities told The Guardian,“this gives companies the power to raise prices and pass on higher costs”.

Lenovo Group also said that its profit margins took a hit after the global chip shortage. Demand for laptops have increased because of purchases by people working at home, which has also led to the doubling of stock prices since August.

(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)

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