And right now, there aren’t enough of them to meet industry demand. As a result, many popular products are in short supply. It is almost impossible to buy a Sony PS5 console; Toyota, Ford and Volvo have had to slow or temporarily stop the production of their cars; Smartphone makers are suffering, and the chip crisis could impact iPhone sales.
In the coming months, and particularly around the Christmas period, it is possible that even more products will suffer from a shortage. So what’s 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 company specializing in electronic hardware. He has orders on his books for several thousand electronic interface cards, which allow students and manufacturers to connect various devices to their computers. His suppliers have announced that some of the components he needs, containing semiconductors, will not be available for 12 months or more.
Gartner analysts say that among the causes of the crisis faced by the chip industry first in addition to the pandemic is the increase in demand for the development of 5G, and the decision of the United States to prevent the sale of semiconductors and others. technologies at Huawei. Chip makers outside the US were quickly inundated with orders from the Chinese company.
Other difficulties are linked to the less evident production complexities that have hindered the supply of some components. There are currently two main approaches to chip manufacturing: using 200mm or 300mm wafer (circular silicon wafer diameter) which is split into many small chips. Larger wafers are more expensive and are often used for more advanced applications. But there has been a boom in demand for low-cost chips, which are incorporated into an ever wider variety of consumer products, meaning the old 200mm technology is more sought after than ever.
Some specialized sites in the sector had highlighted the possibility in February 2020 of a possible risk of chip shortage caused by the lack of 200mm production equipment. With the pandemic, the fluctuation in demand has increased, leading to the storage and advance ordering of chips by some technology companies, and the consequent difficulty in acquiring components. With the lockdown, the demand for laptops, tablets and webcams from consumers who had to work and study from home increased and chip factories closed.
Gartner analysts say, however, that the pandemic wasn’t the only cause of the chip shortage: “It was probably just the last straw in the bucket.” More recently, bad luck has exacerbated the problem. A dire winter storm at semiconductor factories in Texas and a fire at a plant in Japan caused similar delays.
Logistical headaches are aggravating the situation. Oliver Chapman, chief executive officer of OCI, a global supply chain partner, says that for many years the cost of shipping hasn’t been a big concern for many tech companies because their products are relatively small and suppliers could put many into it. of a single 40-foot container. But the cost of shipping containers around the world has soared due to sudden changes in demand during the pandemic. Also accompanied by an increase in air freight rates and a shortage of truck drivers in Europe.
Sending a single 40-foot container from Asia to Europe currently costs $ 17,000 USD, says George Griffiths, editor of global container markets at S&P Global Platts. This is more than a tenfold increase from a year ago when it cost around $ 1,500 USD. Chip makers are responding to sustained demand by increasing capacity, but this takes time, not least because building semiconductor factories costs billions of dollars. “This will not be resolved by this Christmas and I find it hard to believe it will be resolved by next Black Friday [November 2022]”, and it will take several years to achieve … a better balance. The pace of chip demand increased so strongly that a shortage was, at one point, “inevitable”.
Mr Chapman is not convinced 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 the industry in the future as well.
Gartner analysts say consumers are unlikely to notice price increases or widespread shortages of tech products this Christmas. Some required devices, such as game consoles, may become difficult to obtain, with customers having to wait a few months for the item they want. However, he does not expect interminable delays.
The bottom line is: the pandemic has accelerated an already precarious situation for chip makers – we’re in the midst of a tech boom and supply can’t keep up with demand. All of this will not be resolved overnight and all consumers, including those looking for a new car, could continue to experience delays and disappointments for months to come.
