Worldwide Semiconductor Chip Shortage May Have Major Ramifications

Everyone all over the world has benefitted from the digital revolution that has made our lives and workplace productivity better over the past few decades. Behind all of that goodness are a collection of key technology contributors, and the semiconductor is definitely one of them. These powerhouses are kind of unsung heroes, as they’re hidden from view and don’t get the fanfare that CPUs do. Despite the fact that much of what your CPU is capable of is made possible because of a semiconductor chip.

These chips have been produced in large, large volumes for a long, long time. But only just recently has it become a situation where – quite simply – there’s just not enough of them to meet demand. That’s problematic for a whole lot of different reasons, but most front and centre is the fact that manufacturers aren’t able to make enough of the products that need these chips to meet ever-growing consumer demand for them. The most newsworthy example these days? There’s a very specific reason why buying a new PlayStation 5 is a real challenge, and it has nothing to do with anyone’s personal finances.

But this has big-picture ramifications for all sorts of people who rely on their digital connectivity, and if you’re only inconvenienced by not being able to play the newest and best video games then consider yourself fortunate. Here at 4GoodHosting we’re like any good Canadian web hosting provider in that our business puts us right in the middle of being able to understand the magnitude of this issue. And it really is something that pretty much anyone should be aware of.

So here goes.

Not Enough Chips

Semiconductors are also known as integrated circuits and they are both the tiniest and most exacting product ever globally manufactured on a global scale. The majority of all the ones currently at work around the world have been produced by one of 2 Asian powerhouses — Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. However, even these big producers can only pump out some many of them at a time.

So why is there a shortage of chips?

Well there’s a lot of reasons. Part of it is related to the ongoing global pandemic. It’s spurred an explosion in sales for not just laptops, but also home appliances and TVs, webcams, and other items (including air purifiers) that people are purchasing as their life / work arrangement have changed because of COVID.

The next factor is related to the massive surge in online shopping for these same products. Suppliers have had to hedge bets against the peaks and valleys of orders coming in and in some cases they’ve cut back on production just for this very reason. Another type of popular consumer item that needs semiconductor chips these days is your vehicle, and automakers who cut back drastically in the early days of the outbreak underestimated how quickly sales would rebound.

When they tried to catch up, they found that there are not enough of the chips available, and in large part because nearly all of them are being purchased by smartphone and personal computing device manufacturers. 

The last factor here is that making good semiconductor chips isn’t easy at all. There are only three companies — TSMC, Samsung and Intel — still making advanced logic chips, and Intel- the only NA one here –  has been falling behind. Chips are made in plants that cost billions to build and equip and recouping the investment means going full bore with production 24/7.

However, the real factor here is yield – or the amount of good chips per batch – determines success or failure. It takes years of learning to fine-tune your design and production logistics to get a yield of 90% out of the complex photolithographic process needed for consistent and reliable semiconductor chip production.

Chip Hoarding?

It’s true, and it’s a thing. PC makers were already stating the chronic shortage of chips early last year before all of this global craziness began. By the middle of the year Huawei was hoarding components to keep production up in face of U.S. sanctions that threatened to cut it off from its primary suppliers of chips. Other Chinese companies started to do the same and the country’s imports of chips equalled some $380 billion in 2020.

Lost Sales

Some businesses are taking it on the chin with this global semiconductor shortage. Automakers in particular are expected to suffer $61 billion of sales losses and delays to the production of a million vehicles this financial quarter alone. but the fallout now threatens to hit the much larger electronics industry.

The two Asian chip giants are doing what’s needed to cement their dominance: TSMC raised its envisioned capital expenditure for 2021 to as much as $28 billion from a record $17 billion a year prior, while Samsung is directing $116 billion on a decade-long project to keep pace with its Taiwanese arch-rival.

China has its own interests, and has stated its plans to spend more than $140 billion on building a world-class domestic semiconductor sector. But industry insiders say they have a long way to go before they’re up to speed with the Koreans and Taiwanese.

New POTUS has a Plan

Everyone all over the world has benefitted from the digital revolution that has made our lives and workplace productivity better over the past few decades. Behind all of that goodness are a collection of key technology contributors, and the semiconductor is definitely one of them. These powerhouses are kind of unsung heroes, as they’re hidden from view and don’t get the fanfare that CPUs do. Despite the fact that much of what your CPU is capable of is made possible because of a semiconductor chip.

These chips have been produced in large, large volumes for a long, long time. But only just recently has it become a situation where – quite simply – there’s just not enough of them to meet demand. That’s problematic for a whole lot of different reasons, but most front and centre is the fact that manufacturers aren’t able to make enough of the products that need these chips to meet ever-growing consumer demand for them. The most newsworthy example these days? There’s a very specific reason why buying a new PlayStation 5 is a real challenge, and it has nothing to do with anyone’s personal finances.

But this has big-picture ramifications for all sorts of people who rely on their digital connectivity, and if you’re only inconvenienced by not being able to play the newest and best video games then consider yourself fortunate. Here at 4GoodHosting we’re like any good Canadian web hosting provider in that our business puts us right in the middle of being able to understand the magnitude of this issue. And it really is something that pretty much anyone should be aware of.

So here goes.

Not Enough Chips

Semiconductors are also known as integrated circuits and they are both the tiniest and most exacting product ever globally manufactured on a global scale. The majority of all the ones currently at work around the world have been produced by one of 2 Asian powerhouses — Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. However, even these big producers can only pump out some many of them at a time.

So why is there a shortage of chips?

Well there’s a lot of reasons. Part of it is related to the ongoing global pandemic. It’s spurred an explosion in sales for not just laptops, but also home appliances and TVs, webcams, and other items (including air purifiers) that people are purchasing as their life / work arrangement have changed because of COVID.

The next factor is related to the massive surge in online shopping for these same products. Suppliers have had to hedge bets against the peaks and valleys of orders coming in and in some cases they’ve cut back on production just for this very reason. Another type of popular consumer item that needs semiconductor chips these days is your vehicle, and automakers who cut back drastically in the early days of the outbreak underestimated how quickly sales would rebound.

When they tried to catch up, they found that there are not enough of the chips available, and in large part because nearly all of them are being purchased by smartphone and personal computing device manufacturers. 

The last factor here is that making good semiconductor chips isn’t easy at all. There are only three companies — TSMC, Samsung and Intel — still making advanced logic chips, and Intel- the only NA one here –  has been falling behind. Chips are made in plants that cost billions to build and equip and recouping the investment means going full bore with production 24/7.

However, the real factor here is yield – or the amount of good chips per batch – determines success or failure. It takes years of learning to fine-tune your design and production logistics to get a yield of 90% out of the complex photolithographic process needed for consistent and reliable semiconductor chip production.

Chip Hoarding?

It’s true, and it’s a thing. PC makers were already stating the chronic shortage of chips early last year before all of this global craziness began. By the middle of the year Huawei was hoarding components to keep production up in face of U.S. sanctions that threatened to cut it off from its primary suppliers of chips. Other Chinese companies started to do the same and the country’s imports of chips equalled some $380 billion in 2020.

Lost Sales

Some businesses are taking it on the chin with this global semiconductor shortage. Automakers in particular are expected to suffer $61 billion of sales losses and delays to the production of a million vehicles this financial quarter alone. but the fallout now threatens to hit the much larger electronics industry.

The two Asian chip giants are doing what’s needed to cement their dominance: TSMC raised its envisioned capital expenditure for 2021 to as much as $28 billion from a record $17 billion a year prior, while Samsung is directing $116 billion on a decade-long project to keep pace with its Taiwanese arch-rival.

China has its own interests, and has stated its plans to spend more than $140 billion on building a world-class domestic semiconductor sector. But industry insiders say they have a long way to go before they’re up to speed with the Koreans and Taiwanese.

New POTUS has a Plan

The White House is expected to sign an executive order directing a government-wide supply chain review for critical goods shortly, with the Biden administration putting together a longer-term plan for chip supply and aiming it to have a key role in formulating tax incentives for a proposed $12 billion TSMC plant in Arizona and another costlier one Samsung is eyeing for Texas. The EU is also rumoured to be getting ready to do something similar.

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