The global chip shortage describes the current lack of computer chips which was indirectly caused by the Covid-19 pandemic. The simplest explanation for the chip shortage is supply and demand.

Chip supply

As of 2019 Chip supplies, which were already stretched thin due to the China-US trade war saw further decline As Chinese companies, began stockpiling computer chips in anticipation of the forecasted global shortage. The existing chip shortage was further exacerbated by an unforeseen winter storm in Texas and a fire in Japan. 

In February of 2021, 3 million homes were left without power as a cold front swept through Texas killing Dozens of people and causing billions of dollars of damage to infrastructure and private property.

The winter storm also closed semiconductor plants located in Austin Texas to shut down resulting in production delays for Chipmakers NXP, Infineon, and Samsung Electronics.

In April of 2021, The Global computer chip supply was further disrupted when Renesas, a Japanese Electronic Corporation and chip manufacture’s, plant caught fire.

According to Reuters.“Renesas makes nearly a third of the microcontroller chips used in cars around the world”. As of July, the Renesas 300mm chip manufacturing line is functioning at 88% capacity thanks to the coordinated efforts of the Japanese government and Toyota Motor Corp.

In addition to all of the other factors mentioned above the global semiconductor, supply is also being threatened by its biggest drought in 56 years. Taiwan’s drought is significant for two reasons, the first being Taiwan is one of the rainiest places on earth, and the second is Taiwan produces 90% of the world’s semiconductors.

Taiwan is considered one of the rainiest places on earth it also and is considered the home of the $100B semiconductor industry. Taiwan’s precipitation and its semiconductor production are no coincidence, semiconductor production is very water-intensive, the Hsinchu Science Park is home to many of Taiwan’s semiconductor manufacturers is said to use 170,000 tons of water each day. 

Most of the water used in semiconductor manufacturing is a result of the wafer cleaning process that uses water and other chemicals to remove organic, metallic, and ionic contaminants from the silicon wafer.

In 2020 at the beginning of the pandemic, As businesses and schools closed their doors, And instituted home school or work at home policies. The demand for electronic devices Increase. 

Chip demand

The increased demand for computer chips began In the spring of 2020, When businesses, schools, students, and workers suddenly needed to purchase computers and other electronic devices so that they can work from home. 

As people spent more time at home, the demand for new cars declined. In response to slumping demand for new cars, automakers who operate on a just-in-time inventory management schedule purchased fewer computer chips. By Q3 of 2020, automakers were on their way to ending the year with “the lowest sales year for the automotive industry since 2011,” Just as the global demand for TVs, gaming systems, phones, and computers Increased.

The Demand for consumer electronics was so strong during the 2020 COVID shutdown that the U.S. tech consumer technology market was expected to grow by 4.3 percent; However, due to supply chain issues and the lack of computer chips caused by the coronavirus pandemic, the consumer electric market experienced a decrease of 2.2 % during 2020

The story continues, this is part 1 of a Semiconductor themed series.