What Triggered Global Chip Shortage That Is Affecting Almost Every Industry?

The global chip shortage is real, as a result, we are seeing an increase in the price of smartphones and a shortage of other consumer electronics like consoles, CPUs, and GPUs. Not just that, even the auto industry is also being affected by the chip shortage, where some of the biggest auto-makers have either stalled or reduced the production quantity.

It is speculated that the chip shortage issue should resolve itself by the end of 2021 or by early 2022. Given the devices that are currently on sale are likely to the manufactured in the first half of 2021, where, the global chip shortage was at an all-time high, consumers are likely to face the heat in terms of a price hike at least for the next few months.

Pandemic Is The Main Cause For Chipset Shortage

It is evident that the COVID-19 pandemic has affected almost everyone in one way or other. Work from home and learn from home practices has lead to a huge demand for consumer-grade electronics like laptops, smartphones, and tablets. Given theatres were closed, it also created a huge demand for in-home entertainment systems like televisions.

If we break down the chipset demand per industry, the entire auto industry required 9 percent of the overall chipset market, by revenue. Computing, consumer electronics, and wireless technology hold the major share in the chipset demand.

One of the prominent reasons for the chipset shortage is the massive increase in demand, where customers are giving twice the number of orders just to have more than enough stock. In fact, the trade war between China and the US is also said to have a major impact on the global chip shortage.

Why Aren't Chipset Manufacturers Ramping Up The Production?

Chipset manufacturing requires a lot of prerequisites and setting up a fab is an expensive and time-consuming process. Not just that, it is also hard to get consumers for a newly set up fab, as the brands have to share their intellectual property with the manufacturing company.

Globally, there are only a few large-scale chipset fabs such as TSMC, Intel, Samsung, and a few more. Due to the sharp increase in demand for more chipsets, these fabs are running at their full capacity, if not, they are facing an issue with the raw material.

Reason for the automobile chipset manufacturing is the fact that most cars or any automobiles require some sort of chipsets to offer basic controls. These chipsets use 200nm fabrication, which only a select number of foundries are capable of manufacturing, as this is an outdated technology.

Setting up a foundry to manufacture a 200 nm-based chipset does not make any sense, as it costs a lot of money and consumer electronics uses the most advanced nodes. Even if someone wants to set up a semiconductor company, it takes a lot of time. Hence, the automobile chipset shortage is likely to continue for a few more months.

There are a few other reasons for the global chipset shorage are the outrageous winter in Texas, US, and the fire hazard at a Japanese semiconductor company. Hence, it is almost impossible to pinpoint a single reason that has caused the global chipset shorage, as there are plenty of reasons and most of them are definitely triggered by the pandemic.

Via1 | Via2