It is impossible to get a PS5, your iPhone is out of stock, and no one has seen a graphics card in the wild in months. It seems that whatever type of electronic gadget you are looking for is simply nowhere to be found. What is happening in the world? The short answer is a global chip shortage caused by a confluence of factors ranging from the ongoing pandemic to geopolitical tensions and, as always, some crypto nonsense.
The long answer is … complicated.
As usual, Covid is the obvious problem
It’s easy to forget about them most of the time, but every device you own, including the one you use to read this article, is made up of dozens of specially designed microprocessors that require even more specialized factories to manufacture them. It was already a complicated process to maintain, but when the pandemic struck in early 2020, it threw a metaphorical wrench into very literal gears.
The increase in working from home is correlated with a growing need for additional devices. Tellingly, webcams were almost immediately out of stock as millions of people moved their meetings to video chats and wanted something better looking than their laptops’ built-in webcams. Similar pressures to purchase new laptops, phones, tablets, headphones and dozens of other devices are straining the supply of microprocessors. At the same time, the demand for cars, which also require dozens of integrated electronics,abandoned early 2020.
Factories that make microprocessors are not doing well. Since most chips require very specific manufacturing processes, setting up a workflow to start meeting demand for certain parts can take weeks or even months. It takes time for a factory that until recently mass-produced touchscreens for new cars to turn to making iPad screens.
Simply put, it’s hard to nimbly meet demand for electronics even in a normal year, and 2020 was the furthest thing from normal. The pandemic is not over, either. Taiwan was until recently largely free of Covid cases, but a sudden and exponential rise could, according to a Taiwanese official, end up causing “”logistical problemsâIf the country does not have access to more vaccines.
Taiwan’s manufacturing accounts for more than 60% of global semiconductor sales. In other words, the majority of processors used in electronics around the world come from Taiwan. With increasing demand for some devices, a sudden and intense change in the type of devices consumers need, and increasing pressure to stay operational during a pandemic, shortages were inevitable.
Maybe even more predictable, semiconductor prices start to rise to meet this demand. Not only is it difficult to get enough of some devices, but soon it could be more expensive too. Which only exacerbates the following problem.
International trade relations cause even more headaches
Deconstructing the complex nature of international trade disputes is a bit beyond the scope of a single explanatory article, but what we can say with certainty is that it is not simply a matter of higher demand that makes it more difficult ‘obtaining processors. The fact that the vast majority of semiconductor manufacturing in the world is based on a single continent has never been ideal for other countries. And the United States in particular has not always played well.
At the end of 2020, shortly before leaving office, President Donald Trump put restrictions in place on the Chinese manufacturer SMIC. This has led, in at least one instance, to an automaker moving the manufacturing of microprocessors to Taiwan, which has only resulted in Taiwanese manufacturers even more overburdened. In a way, this move was an extension of the Trump administration’s feud with Huawei, which in turn was an extension of the much more complicated US relationship with China’s position in the global economy. .