How COVID-19 May Have Triggered A Global Semiconductor Shortage
It's not an overstatement to say that semiconductors power the modern world. They're not only a key component of nearly every electronic device we buy and use, but they also power the factories that make those electronic devices. They power our laptops, cell phones, cars, washing machines, refrigerators, yeah, even our refrigerators and this is just the stuff in our home.
I am not even getting into all the way into how semiconductors are important to the military and to the power grid.
If software is eating the world, then the chips are the teeth!
And now, there aren't enough of them(semiconductors), getting made. Yes, you might have heard about companies jacking up prices of consumer electronics because of this massive global semiconductor shortage and it's getting so bad, that General Motors, one of the world's largest automakers, said it could lose up to two billion dollars because the semiconductor chip shortage forced it to temporarily shut down some auto manufacturing plants.
POTUS Joe Biden just ordered the Economic and National Security experts to look for gaps in the semiconductor supply chain in the United States as they want to see how reliant the US has become on other countries to manufacture semiconductors.
Here's how the global chip shortage got so bad and what's being done to fix it.
So, what are semiconductors?
It's silicon with transistors built into it and these circuits are put into basically any product these days that needs power i.e almost every single electronic product these days.
When people talk about semiconductors now, they're talking about the advanced microchips that power smartphones, computers, cars, advanced medical equipment and the analog semiconductor devices that power radios and thermostats. The transistor, a kind of semiconductor, was first successfully demonstrated in 1947 at bell labs in new jersey its inventors won the Nobel Prize for Physics, created the first tech companies in Silicon Valley and basically laid the foundation for the modern digital world.
After the transistor came the Integrated Circuits(ICs), the microprocessor, et cetera et cetera until the super small, super advanced Chips that we have today.
Now, the semiconductor industry is massive. Within the industry, there are semiconductor companies that DESIGN THE CHIPS called FABLESS companies and there are companies that MANUFACTURE them called FOUNDRIES. There are also Integrated Device Manufacturers like Intel, that both design and manufacture chips. However, there has been an steady trend of major semiconductor companies adopting the fabless model and contracting out orders to foundries like Taiwan Semiconductor(TSMC) or Samsung, and that trend toward fabulous has helped complicate the chip shortage.
But the question still remains, how did this global semiconductor shortage start? Well, the answer is COVID-19.
The coronavirus pandemic forced people to work from home, to go to school from home, to just basically do everything from home. People upgraded their computers, they got smart speakers, tricked out their home theaters, and played a lot of video games. Businesses scrambled to set up remote work systems and needed more cloud infrastructure.
So what became very clear is that electronics companies had a supply chain disruption but once that kind of started working its way through in the summer and china started getting back to work, these companies knew that they needed to increase production by a lot.
There's no sign that the demand is slowing for semiconductors. global semiconductor sales in 2020 showed an increase of 6.5 compared to the 2019 figures. According to the semiconductor industry association, global sales for the month of December 2020 were an increase of 8.3 compared to the December 2019 total.
Another big reason for the shortage, is that cars are getting more advanced and they need more semiconductors. In fact, right now it's the Auto Industry that's feeling the squeeze in computer chips most acutely. Cars not only need advanced chips to run increasingly complicated in-vehicle computer systems, but they also need older less advanced semiconductors for things like power steering.
We are in a real difficult situation, we’ve heard from the likes of AMD’s like Lisa Su and others about the expectation of this lasting about six months or so. If her interpretation is right, it’s gonna put us well over halfway into that six month period and I really do wonder are if we are gonna be able to shorten this delay at all.
We know that it’s no secret that the electronics manufacturing is kind of based in China right now, but what people kind of don’t know is that the number one pure chip factory in the world is in Taiwan TSMC. Taiwan has not had the trade issues that China has but it’s still an island off the coast of china so there was a lot of discussion early in the pandemic last year that we have to look at the stuff from a geopolitical standpoint because you know if the military can’t make a jet uh because they don’t have chips and then Taiwan is caught in a geopolitical dispute a lot of people just said we need the ability to make leading node ships in our own country.