Global Chip Shortage

By Muskan Kumar — Correspondent

If you are looking to buy an older phone model, you’ll more likely end up with a newer model. The global chip shortage has been in the making for years, but with the pandemic and supply line issues, the tech industry and automotive industry are now beginning to face delays as demand grows to reach pre-pandemic levels.

Many experts point to the rise of 5G, a shifting momentum to electric cars requiring more chips, and the US decision to stop sales of semiconductors and other tech to Huawei as events that have already put pressure on the global chip supply chains. Demand for older technology requiring 200 mm wafers instead of newer 300 mm wafers is increasing but the supply is lacking. The backlog of chips has only been exacerbated by Covid-19 and weather-related issues resulting in the closure of factories, as is the case in Texas.

Syed Alam, the global semiconductor lead for Accenture, a professional IT services and consulting company based in Ireland, noted that at the beginning of the pandemic, smartphone companies benefited from the extra supply that the automotive industry left when they dropped orders, leading the automotive industry to experience a chip shortage when car demands rose faster than expected. “Now that the automotive sector and others are catching up and starting to reclaim the capacity they had given up, there is a fierce competition for semiconductor supply. This has created supply pressure for smartphone chips.”

Glenn O’Donnell, VP and research director at the analyst firm Forrester, said that even Apple, the world’s largest technology company and the top priority of chip manufacturers, is still vulnerable to shortages of semiconductors like silicon. “While everyone focuses on CPUs (the high end of chips), every device (including an iPhone) contains a whole lot more and without these supporting chips, the phone is nearly useless.”

Car companies are feeling the pinch too. Ford European Chairman, Gunnar Herrmann, says that demand is high and in normal times there would be nothing to complain about. However, “What we learned is that some of the larger wafer/semiconductor companies have stopped building up capacity… some families, especially the larger microchips where we are using 45/50 nano mm will follow into next year and into 2024.”

Volkswagen CEO Herbert Diess says that they are seeing a second wave of semiconductor shortages. “We expected to get better supply after the summer holidays, but as in Malaysia, Covid is hitting quite strongly and so we have another shortage now. Hopefully, we can recover in the last quarter.”

“We will face a general shortage of semiconductors because the internet of things is growing so fast so there will be constraints which we will try to manage,” said Herrmann. 

“It will be the case that car prices will rise because raw materials will definitely go up. It’s not just semiconductors, it’s lesium, plastics, steel… there are shortages all over the place,” he added.

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