The scarcity of semiconductors also known as microchips has been traced to the inability of chips to meet industry demands following the high sale of electronic devices during the Covid-19 pandemic in 2020.
Report compiled by World Semiconductor Trade Statistics (WSTS) shows that global semiconductor industry sales were 439.0 billion dollars in 2020 representing an increase of 6.5 percent compared to the 2019 total of 412.3 billion dollars making a difference of 26.7 billion dollars.
However, it is projected that the automobile industry will lose $210 billion in revenue because of the lack of computer chips, according to one recent report. Game console makers have missed targets. Even the seemingly unstoppable smartphone manufacturers are facing slowdowns.
Semiconductors are the essential component of electronic devices which enable advances in communications, transportation, computers, health care, military systems, and other applications.
They are simply the heart of all digital products and it affects manufacturing when supply runs short.
Falan Yinug, Director of industry statistics and economic policy at Semiconductor Industry Association (SIA), stated that the global outbreak of the Covid-19 contributed majorly to the scarcity and shortage of chips with consumers stocked up with high electronic demands.
The Director recalled that the events leading to the current auto chip shortage began during the second quarter of 2020 when automakers understandably reduced production and chip purchases as the virus spread across the globe and chip makers saw surging demand for semiconductors used to enable remote healthcare, work-at-home, and virtual learning, which were needed during the pandemic.
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“The shortage is largely the result of substantial swings in demand due to the pandemic and the increased use of semiconductors in advanced vehicles,” Yinug said.
He added that the semiconductor industry is working diligently to upgrade production to meet renewed demand and supply-demand imbalance cannot change immediately.
IHS Markit, a global information and data firm noted that the shortage of auto semiconductor chips could impact nearly 1.3 million units of global light vehicle production in the first quarter of 2021.
According to the data firm, a fire at the Japanese Chip-making factory owned by Renesas Electronic Corp, which accounts for 30 percent of the global market for microcontroller units used in cars, also worsened the situation.
The data firm explains that the rise in demand for chips from the automotive industry started when the supply lines were already stretched by significant demand for chips from the consumer electronics sector for 5G phones and infrastructure
A report from FP insider, a global magazine, revealed that the battle between the United States and China over tech supremacy also affected the supply chain of semiconductors making it scarce for industrial access.
A report from Reuters noted that factories that produce wafers which are the makeup of semiconductors cost tens of billion dollars to build, and expanding their capacity can take up to a year for testing and qualifying complex tools.
Semiconductor industries play a major role in the development of new technology products because it has made devices smaller, faster, and more reliable. It is one of the world’s most advanced manufacturing sectors.
They are made from pure elements or compounds in a process called doping where a small amount of impurities are added to these pure elements causing large changes in the conductivity of the material
Chips were invented in the United States of America and they are also one of the leading countries in Chips manufacturing. Taiwan’s TSMC which is the Taiwan semiconductor manufacturing company and South Korea’s Samsung electronics in Asia is also one of the top manufacturers of semiconductors.
Yinug also noted that the global chip shortage is affecting a number of different industries and has hit the vehicle market particularly hard.
He states that restoring market balance will take time because semiconductor manufacturing is not suited to rapid and large shifts in demand and making a semiconductor is one of the most complex manufacturing processes which takes lead times of up to 26 weeks in the industry to produce a finished chip.
