The Global Shortage in Chip Electronics: Why it Matters?

Automobile manufacturers slashed production. Gaming consoles got harder to find in shops. Broadband service providers faced delays for internet routers. All of these issues and more had the exact cause: the cascading and sudden shortage of semiconductors. These things are also known as IC or Integrated Circuits, or just chips.

They may be the smallest but most exacting product ever made on a global scale. The combination of the difficulty in producing and the cost of making these things has fostered a global reliance on two Asian powerhouses: Samsung Electronics Corporation of South Korea and Semiconductor Manufacturing Company Limited of Taiwan.

This dependence on semiconductors was brought to life in 2020 when the Coronavirus Disease-19 pandemic hit and the rising United States – China tension made these things scarce. Hundreds of billions in American dollars will be spent in the next coming years in the global race to expand chip production, with economic and geopolitical implications. Listed below are some reasons why there’s a shortage of semiconductors.

What is a semiconductor? Check out this site for details.


The age of stay-at-home

The stay-at-home era pushed semiconductor demands beyond the levels expected before Coronavirus Disease-19 hit. Lockdowns prompted the growth in sales of notepads and laptops to the highest in recent years. Home networking devices, monitors, and webcams were snapped up as companies are forced to move their work out of their offices. Chromebooks and personal computers were in demand because of school shutdowns. Sales also jumped up for appliances from air purifiers to televisions, all of which now come with custom semiconductors or chips.


Shifting forecasts


Automobile manufacturers that cut back dramatically in the wake of the pandemic underestimated how quickly vehicle sales would rebound. They rushed their orders late in 2020, only to get turned down by chip manufacturers because they were stretched out supplying smartphone and computer giants like Microsoft and Apple.




Personal computer makers started warning about the tight supply of chips early in 2020. Around mid-year, tech giant Huawei Tech – a Chinese mobile phone manufacturer that also dominates the market for 5G networking devices – started to build up its inventory to make sure it can survive the United States sanctions that cut off its primary suppliers. Other firms followed suit, hoping to get a share from Huawei, and chip imports from China started to climb up to almost $400 billion at the end of 2020, from $330 billion the previous year.




The bitter February cold that happened in Texas led to severe power outages that shut down semiconductor plants around Austin. It was March before the Texas facility of Samsung was back to their normal operations. A Renesas Electronics Corporation factory in Japan, a primary provider of car chips, was ravaged by fire in late March, disrupting their production for a couple of months.


How semiconductors are made? Click for information.


Who is affected?


Superconductor or chip shortages are forecasted to wipe out more or less $100 billion of sales for automobile manufacturers this year, with the production of 3 million cars lost, or about 4{9b05dda05d1a6149e553980fd75ab86197b83a97fc3537936812639272beac2c} of the projected total. According to tech mogul and Tesla’s chief executive officer Elon Musk, he has never seen anything this massive in his years in the business.


Samsung warned everyone in March that there will be a serious imbalance in demand and supply globally. Taiwan Semiconductor Manufacturing Company forecast in April 2020 that the shortages can extend until 2022. Broadband providers in North America and Europe were facing severe delays when ordering internet routers.


Apple Incorporated said that supply restrictions were crimping MacBook and iPad sales, which is projected to knock $3 to $4 billion off their third-quarter revenue. In May, gaming giant Nintendo Corporation said that the shortage was slowing down the production of their Switch gaming device.


What is a microchip?


It is the thing that makes electronic devices smarter. It is made from conductive materials like silicon. This thing performs various functionalities. Memory chips that store data are pretty simple and have become a pretty cheap commodity.


Logic chip electronics that run programs and act as the brains of devices are more expensive and complex. These usually carry name brands like Nvidia, Qualcomm, or Apple, but these organizations are actually just the designers of semiconductors, which are made in foundries or factories.


What about manufacturers outside Asia?


The United States, which leads the world in microchip design, is looking to encourage firms to expand or build advanced factories inside the country to address economic and national security risks. According to a June report, President Joe Biden recommends that Congress appropriate at least $50 billion to help support chip research and production inside the United States.


The bill quickly passed the senate plenary the same day, including the $52 billion appropriations. The Biden administration plays a pivotal role in drawing up tax incentives for the suggested $12 billion Taiwan Semiconductor Manufacturing Company plant in Arizona.


Samsung is also considering a $17 billion facility in Texas. Similarly, with the help of Samsung and Taiwan Semiconductor Manufacturing Company, EU officials are looking to build an advanced chip factory in Europe as part of their goal to boost semiconductor manufacturing to at least 20{9b05dda05d1a6149e553980fd75ab86197b83a97fc3537936812639272beac2c} of the market by the year 2030. In April, the United Kingdom ordered a thorough investigation of the California-based firm, Nvidia, because of its $40 billion buyout of the British chip designer Arm Limited on the grounds of national security.