Semi-conductor chip is mostly used by modern products/gadgets as one of the most important features. Products such as phones, computers, and video games are all embedded with chips in them. One sector that had to pause production due to chip shortage is car manufacturers. The chips embedded in these gadgets and automotive help in the functioning of these items. They protect- for example, the computer from burning up while playing video games and help the devices run efficiently. The importance of this small yet delicate object cannot be over-emphasized, as many device-producing companies rely on them for the proper functioning of their products or gadgets.
The year 2021 came with many challenges in the functioning of most companies and industries, which produce these chips due to the pandemic that disrupted the smooth running of manufacturing activities. One of the ongoing crises is the scarcity of this chip. The pandemic greatly affected the production and supply of the semiconductor chip. The shortage of available chips has halted a lot of manufacturing companies of video games consoles, cars, and many other devices that make use of a semiconductor chip.
What Problems Has the Chip Shortage Caused?
The cause of this scarcity or chip shortage can be associated with the unexpected COVID 19 pandemic and the lockdown during the pandemic. Many of the chip-producing industries and facilities were locked down, which led to a decrease in inventories and production. Also, because most companies, students, and business owners were fully engaged with working or studying at home, the demand for computers, laptops, and high-speed internet connections, which require the use of the chip, was in high demand.
Most people experienced a hard time adjusting to the challenges faced during the period of shortage of the chip. The question, therefore, on the mind of most consumers is; how long will the chip shortage last? What is the way out of this economical challenge? This article aims to answer some of the questions you have about the chip shortage and also look at possible solutions to problems.
Apart from the pandemic being the major cause of chip shortage globally, there had been a trade war between the United States and China. In September 2020, the United States Department of Commerce imposed a restriction on importing chips from China’s largest chip manufacturing company, Semiconductor Manufacturing International Corporation (SMIC), which made it difficult and impossible for the company to sell to top countries with American ties.
This cut-off made users and companies opt for other chip-manufacturing companies, increasing the demand on those companies, which were already producing chips at their highest capacity. Higher demands for the chips led to low supply as the manufacturing companies of these chips were unable to meet customers’ demands.
Also, a major setback occurred in the early month of February 2021, where a severe winter storm caused the closure of two manufacturing facilities in NXP Semiconductors and a company owned by Samsung in Texas. The closure led to a shortage in the supply of these chips for several months.
Another severe weather challenge contributing to the chip shortage is the drought in Taiwan, a country that records a high supply of semiconductor chips. The manufacturing facility in Taiwan uses about sixty-three thousand (63,000) tons of water a day to clean their wafers and factories. Therefore, the scarcity of water supplies affected the manufacturing of these chips, leading to increased scarcity.
Another factor contributing to the chip shortage is the increase or rise in the price of raw materials. The major raw material used in the production of the semiconductor chip is copper. And the hike in the price of copper and other materials in 2021 affected the production of chips immensely.
Who then has been affected or impacted by this chip shortage?
The impact of this chip shortage is greatly felt by companies or industries that use chips to produce their products or devices, like car manufacturing companies and video game manufacturers. Chip shortage in cars is greatly affected, as modern cars use about 1,500 to 3,000 chips. Chip shortage automotive affected the production of so many vehicles, as most car manufacturers suspended production due to pandemic that led to a shortage in the chips needed to complete car production.
Manufacturers like Henry Ford suspended the completion of many vehicles as his company waited for chips to finish car assembling. This led to the supplies of cars not meeting customers’ demands. Chip shortage in automotive industries led to many industries shutting down production and some workers being laid-off from work due to inability to meet demands.
Another impact of the chip shortage was felt in the manufacturing of car brain boxes and other features. Most car features now require a semiconductor chip for their efficient functioning. Therefore, the shortage in chips production led to the hike in manufacturing prices and became more difficult to find, so manufacturers had to produce in lower numbers than they normally would.
Therefore, how long will the shortage of chips last, and how will the challenges be fixed? Most companies that are involved in the production of these chips are all working towards providing a higher increase in production. What then should consumers expect? There is a high expectation as experts predict the shortage of chips to end by the end of the year 2022 and in the middle of the year 2023. There’s an expectation that by the end of 2023, there will be a better and more increase in the production of the chips by manufacturing industries. Other companies are planning on increasing the capacity of their manufacturing plants.
Chip Away
Tackling the main causes that led to the shortage in chips production is the major concern of the major firms that are involved in its production. This will lead to the resumption and completion of unfinished cars and other products that have been left unfinished since the experience of the chip shortage. Though an exact date is yet to be known as when the chip shortage will come to an end, knowing that manufacturing companies are working tirelessly towards finding a solution brings a sense of hope to customers and other users.
