Semiconductor Shortage | Why is there a Semiconductor Chip Shortage?

Semiconductor shortage, this is the headline that is dominating in the auto as well as the tech sector throughout the world and this is the first time when Tech and auto sector is facing scarcity and crunch of a product to an extent where they are forced to halt the manufacturing process. 

The demand for chips is far greater than supply, and a number of automobile manufacturers, as well as electronic companies for consumers across the globe, have declared that their products could be affected.

As the markets have resumed again and people have started purchasing, the demand gamma has been increased but the supply chain is facing a shortage of this small yet crucial component which has ultimately led to the manufacturing stoppage of the electronic devices and most importantly the car manufactures are facing this issue and have halted the process.

Experts from the industry and policymakers are looking for innovative ways to avoid massive bottlenecks that could be a problem in the microprocessors’ supply chain.

World leaders and administrators of global companies are concerned about the worldwide shortage of semiconductors. This has impacted deals and production across various countries, and there’s no quick solution on the horizon.

Since the beginning of the COVID-19, a variety of businesses across industries have expressed their concern about the situation.

The demand for chips is far greater than supply, and a number of automotive manufacturers and companies that deal in consumer electronics around the globe have stated that the manufacturing process may be affected.

This particular crisis isn’t likely to change in the near future and the supply issues may persist until 2023. While companies are currently in a battle to increase production, the situation is likely to get worse until a resolution is reached.

The Chief executive of Intel made a statement that warned about the worst scenario is about to happen. He also stated to BBC that it could take 1 to 2 years before the supply of goods returns to normal and everything gets resolved.

Although solving the issue isn’t impossible, however, it’s an exhausting and lengthy task.

What is a Semiconductor? Why it is so important?

Semiconductors are substances that cause or produce a channel of conductivity that is shared among different components of an electronic system, especially between conductors (generally metals) and nonconductors and insulation materials (such as the majority of ceramics).

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

In layman language, a semi-conductor also called by many a Chip or an integrated circuit, the semiconductor is a material made up of silicon and used in electronic components like integrated circuits, micro-circuits, and micro-chips and integrated circuits collectively made of silicon, germanium, and gallium arsenide.

It has multiple applications and is used in a variety of devices including mobile phones, Motherboards, Laptops TVs, radios, infotainment systems of cars and automobiles, etc.

Why is there a Semiconductor Chip Shortage? Reason Behind Semiconductor Shortage

Semiconductors or integrated circuits resemble the originative property that lies between insulative materials and conductive ones. Most often, they are made of silicon purely and they provide power to a range of gadgets including mobile phones, Notebook PCs, cars as well as household appliances and gaming consoles.

These small entities serve multiple functions, including powering displays and transmitting the information. And now when technology and metaverse are taking cloud on the world, the need and dependence have ultimately increased. 

Therefore, a shortage of supplies will have an impact on sales of vehicles refrigerators televisions, laptops, computers, and various electronic devices and automobile manufacturers

Making silicon and germanium-based semi-conductor chip needs almost 3 to 5 months on average to be manufactured in a quantity that would actually fulfill the needs of companies and consumers.

A chip’s production typically takes longer than 4 months and includes massive factories, vacuumed rooms, highly expensive machines, that have lasers and molten tin, according to a report noted from the internet.

Semiconductor Manufacturers known as “Taiwan Semiconductor Manufacturing Corporation” (TSMC) are holding the world’s biggest contract as a chipmaker, and its customers are Qualcomm, Nvidia, AMD, and also the world’s biggest mobile phone maker-Apple.

It owns 56 percent of the foundry business for manufacturing chips in the whole world and this is a major number as compared to other manufacturing countries. 

The soaring sales of electronic devices in the course of the outbreak created a huge need for electronic components. However, COVID-19 isn’t the sole cause of the shortage.

The tension between China and the United States and China is another factor, considering that the majority of US businesses deal with Chinese firms. For example, Huawei, which supplied to American chipmakers was removed from the blacklist by the US government.

This shortage of semiconductors has greatly affected the supply chains and limited the production of a variety of electronic equipment models in 2021. Foundries are raising prices for wafers and, in turn, chipmakers are increasing the cost of their devices.

This scarce condition of semiconductor shortage is expected to ease out from March 2022 or after that. 

Impact of Semiconductor Shortage on Automobiles

Certain auto producers had to reduce production and ultimately stop their production temporarily because of the scarcity of semiconductors.

It only exacerbates the problems of the automotive industry that were already battered by pandemic-related interruptions. The resulting production troubles will hinder the process of recovering from the assiduousness.

As per the figures from the Society of Indian Automobile Manufacturers (SIAM), the wholesale market of cars in India fell more than 10% till now. 

And, 10% is a big number as compared to the normal production rate. 

India’s biggest automobile manufacturer Maruti Suzuki has reduced its 60% produce in the past months of 2021 from June 2021 to October 21, because of the liquid unavailability of semiconductors. 

Also, another car giant, Mahindra also cut down its production by almost 25 percent during that period and people faced this issue equally as their deliveries were delayed. 

The company kept its production line shut for seven consecutive days in a week.

The Managing Director of Suzuki stated that the semiconductor shortage seems to be a challenge and an opportunity of creating some new manufacturing units.

As this extensive task requires big capital and human force, the Indian alone cannot assure the full viability of such an investment in semiconductor projects.

Thus, there is a requirement for the merger of different sectors and countries.

There is a good chance that the deficit could affect sales in the festive season of the country.

Tesla has announced that it is working on a chip called the “Dojo” chip which has been developed in order to introduce artificial intelligence (AI) in databases. Elon Musk said that the Dojo chips would be functional at the end of this year. 

Now, the question here is when will Indian automakers will create or produce a chip of their own.

Impact of Semiconductor Chip Shortage on Electronics and Computer Industry

The manufacturing process of consumer electronics including tablets, laptops, smartphones, and other electronic devices has been impacted by the lack of semiconductors.

In a conference call following the yields call to analysts Apple Chief Executive Tim Cook has stated that- supply restrictions will impact the sales of the iPad as well as iPhones. He also claimed that the problem is not related to processors that are intensive to make, rather the chips that are used for operations such as driving displays or decoding music and video, Officially called Legacy Nodes are currently being made with older equipment.

Also, South Korea’s biggest syndicate Samsung Group said that it would fund Two Hundred Forty trillion wons that is almost equal to Two Hundred Six billion dollars.  And, in the coming 3 years, it will be focusing on increasing its business in the biopharmaceuticals industry and making AI-oriented semiconductors with robotics quality.

Right now there are Numerous tech firms who are trying their hands in making their own chips which can not only ease the present supply-related problems but also help the sector in the overall development.

MacBook comes with Apple’s internal M1 chips.

You might have also faced this issue, where you didn’t get the chance of having your hands on your favorite device or gaming console, and you might be aware of why this is happening. 

The worldwide shortage of semiconductors has hit the Indian mobile as well as the consumer electronics and automotive industries with a hammer during the season of celebrations where sales typically peak and the automotive industry is reported to have collected about 5 lakh orders awaiting approval.

Although customers typically get discount deals or impressive discounts during the festive season this year they’re paying more for a variety of products including mobile phones and televisions to automobiles because of the shortage of chips. The freebies are gone

The epidemic has seen many of us purchase new products such as monitors and computers to allow us to work at home, or gaming consoles or phones that keep us entertained, there’s been a major interruption to the manufacturing of semiconductors. Demand is outstripping supply.

Automakers are investing in high-tech EVs as well as the increase in the sales of computers and televisions, and the roll-out of innovative technologies such as games consoles and 5G-equipped mobile phones can all be blamed for the increase in demand.

FAQs About Semiconductor Shortage

What is the cause of Semiconductor Shortage?

At first, this shortage appeared to be partially due to the increased demand for advanced chip technology from consumer electronics and the computer industry, through Covid-19. In an overview, global semiconductor sales fell in the period between 2017 and 2019, however, by 2020, sales had increased 6.5 percent. Consumer product demand wasn’t the only reason.

Till when Semiconductor Shortage will last?

It is expected to resolve by early 2023. As many countries and tech brands have got together to work on this issue.

How can I fix the chip shortage?

Investing in existing and new manufacturing facilities for chip production is a good option, and most companies are already making this investment. However, Covid-19 has disrupted supply chains that keep the plants operating at their normal rate and not even the higher rates that would be required to keep pace with demand.

How a Semiconductor is made?

Semiconductors are materials with free electrons within their structure which can easily move between the atoms and facilitate the circulation of electricity. The silicon contains the outermost orbital of four electrons which allow covalent bonds to form a lattice and create crystals.