The global chip shortage, also called the semiconductor shortage, seems to have taken hold of everyone in the world, although it should be something that should be obvious.
Almost everything these days has silicon chips, from phones and computers to kitchen appliances and even cars. And all this technology is getting more and more advanced, so the best processors aren’t just being reserved for the latest gaming PC.
This is not the first time this has happened: major chip shortages have occurred on several occasions before, including in 1988 (opens in new tab) due to high demand and in 2000 due to a shortage of various Intel products (opens in new tab). And again in 2011 when an earthquake in Japan caused a severe shortage of memory and NAND displays (opens in new tab).
Chip shortages tend to be due to supply chain or human labor reasons. However, instead of the industries that are so reliant on these chips overhauling the production process to make it less vulnerable to this shortage, it’s been largely a business case as ever.
And now that the latest shortage, which started in 2020, has the entire tech industry at its fingertips, from cars to the latest and greatest graphics cards and video game consoles, everyone is suddenly asking what the global chip shortage is, why it’s happening, and how long it will be before we see any improvement.
Some of these questions are easier to answer than others, but we’ve gathered all the resources we can to help explain how we got here.
What is the global chip shortage?
The global chip shortage is a phenomenon that affects the semiconductor industry and the industries that depend on it when the former cannot produce enough chips to satisfy the demand of the latter. These chips are vital to the tech industry at large as they are used in virtually every modern electronic device in the world.
Integrated circuits are created by weaving tiny semiconductor nanoelectronics onto layers of silicon. This invention revolutionized electronics – and the world – for the past 70 years, but it also created a thorny problem.
Unpredictable disruptions can result in massive shortages in nearly all consumer goods that have electronics or employ them at some point in their production. This can affect everything from the quality of rail service in cities to the food that makes it to supermarkets. It goes far beyond impacting the availability of consumer goods like the best monitors, iPads and computers.
We are currently in a time of trouble. Consumers have experienced a shortage of just about everything in the last couple of years – so much so that it is one of the main drivers of global price inflation in most consumer goods.
What caused the global chip shortage?
The main cause of this latest global chip shortage is the ongoing COVID-19 pandemic which started in late 2019. There have been two main results of this: disruptions to supply chains due to labor shortages and a 13% increase in global demand (opens in new tab) for PCs due to the shift to work-from-home economics.
Within the computing industry in particular, the shortage has been further exacerbated by the rise of cryptocurrency. Graphics cards and CPUs have been in short supply ever since those mining these digital currencies added an unexpected source of demand for these components, making it even more difficult for the traditional consumer to find them.
Another cause was Taiwan drought series (opens in new tab). Taiwan is one of the world’s leading chip production centers and is home to Taiwan Semiconductor Manufacturing Company (TSMC), one of the most important semiconductor suppliers. These droughts have affected the production of ultrapure water, which is used to clean both factories and the silicon wafers from which silicon chips are manufactured in volume.
Several other events that impacted the chip shortage include political tensions between the US and China, winter storms in texas (opens in new tab)fires at Japanese facilities, COVID-related factory shutdowns in Shanghai and the ongoing Russia-Ukraine war.
When will the global chip shortage end?
Many industry professionals like Intel and AMD have made projections about when the semiconductor industry will recover from this global chip shortage. The consensus is that it will last until 2023.
Pat Gelsinger, CEO of Intel said that “Demand has exploded to 20% year over year and disrupted supply chains have created a very large gap… and this explosive demand has persisted”, something that will take years to fully recover. Dell co-founder and CEO Michael Dell also believes the shortage will last for a few more years.
AMD CEO Lisa Su a similar perspective, believing the shortage will begin to ease in late 2022 as “the pandemic has just taken demand to a new level.” This was supported by forecast reports from Gartner, an industry analysis firm, which stated that it would also last through 2022.
About that, TSMC and Quanta Computer – the sole suppliers of some of the best MacBook and Mac models — have been looking to open new factories and move production sites to increase chip production, but that is years from helping to alleviate the shortage. TSMC is also trying to open new locations in the US, but it has been an equally slow process.
There is hope, however, as some recent developments have helped alleviate the shortage. Graphics card and CPU stock, which has been a pretty accurate representation of shortage status, slowly recovered. One of the main reasons is the decline in Ethereum mining, as well as cryptocurrencies in general.
Chip manufacturing factories that were started before the pandemic are starting to come online, and some of the home-based and hybrid workforce demand for new technologies for their jobs has largely been satisfied and is unlikely to rise again in the way it has. took place in 2020.
With new technology products being released every year, however, and the increasing penetration of computers into formerly analog products and services, it’s impossible to say how far we are from a complete recovery, or if it’s even possible.