Semiconductor Shortage

From high-end cars to washing machines, every product is powered by semiconductor chips or processors. However, there has been an immediate and cascading shortage of Semiconductor Chips. Experts have warned of a continuing shortage of semiconductor chips due to the quick proliferation of the Omicron variation of COVID-19 worldwide.

Experts have warned that, despite the rapid expansion of the Omicron variant worldwide, supply disruptions would not intensify in 2022, as the Omicron surge should have a lighter impact on the chip supply chain. There are many Semiconductor Companies in the USA as well. 

Semiconductors are made up of pure elements like silicon and germanium and compounds like gallium arsenide and cadmium selenide.

Use of Semiconductor Chips

Semiconductor chips are the essential building blocks of modern electronics and information and communications technology goods, serving as the heart and brain. 

They power a wide range of products, including automobiles, laptops, cellphones, home appliances, and game consoles. Despite their small size, they perform various tasks, including powering screens and conveying data. 

Because these chips are now a crucial component of modern automobiles, household appliances, and medical equipment, their scarcity impacts sales of these items, such as cars, refrigerators, laptops, televisions, and other electronic devices.

Semiconductor Chip Manufacturing and Global Producers 

Precision is required for fabricating  Semiconductor chips. It takes more than three months to manufacture and involves massive factories, dust-free rooms, multimillion-dollar machinery, molten tin, and lasers. 

Taiwan Semiconductor Manufacturing Company (TSMC) in Taiwan and Samsung Electronics in South Korea are the leaders in semiconductor manufacturing. Intel, an American chipmaker, recently announced plans to construct two new chip facilities in Chandler, Arizona. As online activities grew worldwide, the Covid-19 Pandemic outstripped demand for these Semiconductor chips companies in the USA.

Reasons for Semiconductor Chip Shortages 

• Covid-19 Pandemic is a term used to describe a situation in which the Pandemic had a two-fold effect: During the Pandemic, manufacturing came to a halt, affecting the supply chains of products that required one or more of these chips. As everything from school to business became online, lockdowns boosted computers, tablets, and smartphones sales to their greatest level in a decade.

• Because of the Pandemic, the automotive industry was on the verge of being shut down in 2020. 

• False forecasts by automakers underestimating the recovery in car sales resulted in rushed-up re-orders late in 2020, driving higher demand for medium-level chips used in automobile manufacture instead of the tiny chips used in smartphones and laptops.

• China-US Trade War– Chinese smartphone makers began storing inventory and semiconductor chip companies to ensure that they could withstand US penalties that were expected to cut them off from their main suppliers. 

• Production operations in the United States were harmed by the cold while wildfires ravaged Japan.

• Manufacturing advanced logic chip companies is an expensive and time-consuming operation that necessitates extreme precision and large long-term bets in a constantly changing field.

• Early in 2020, computer manufacturers began warning about supply shortages. Then, in the middle of that year, Huawei Technologies Co., the Chinese smartphone maker controlling the global market for 5G networking gear, began stockpiling inventory to guarantee it could withstand US penalties that threatened to cut it off from its main suppliers.

Some Semiconductor Companies in the USA

1. Nvidia

2. AMD

3. Qualcomm

4. Texas Instruments

5. NXP Semiconductors

6. Intel

Initiatives to address the scarcity of semiconductors

Initiatives at a Global Level

Various governments attempt to protect their interests by introducing packages to encourage other chip companies to manufacture.

TSMC, which owns 24% of the semiconductor supply chain, is building a $12 billion plant in Arizona.

TSMC has agreed to set up specialist technology fabs in Japan and Germany.

The Effects of the Semiconductor Shortage

• As worldwide demand for semiconductor chips in the USA continues to surpass supply, many businesses have been impacted.

• Chip shortages are estimated to cost carmakers USD 210 billion in sales this year, resulting in the loss of 7.7 million automobiles.

• The supply chain will be significantly disrupted by the lack of semiconductors, limiting the production of many types of electronic equipment.

• Because of the disruption of the global supply chain, prices of daily appliances and electronic items — from televisions to smartphones — have soared.

Conclusion

The pandemic and the chip shortage have made one thing patently clear: managing change and remaining resilient requires a flexible, agile supply chain. As part of its ‘Make in India’ push, India is finalising plans to mass-produce semiconductor chips. All of this is being done to achieve semiconductor manufacturing self-sufficiency, improve data security, and prevent countries throughout the world from being held hostage by specific members of the present semiconductor supply chain.