The rise in prices of all devices, such as TVs, mobile phones, toys and cars, is pretty predictable. This is due to the global shortage of semiconductor chips and the problems they face in their production. This issue is not recent as it has started almost from the beginning of 2020. But it has got much worse since then.
What are semiconductor chips?
Semiconductor chips are the basis of all electronic circuits, used worldwide in all devices and machines. They are made mainly of silicone; adding electrical circuits and transistors. These chips allow the storage and management of electrical signal information.
The problems with semiconductor chips
The problem is actually exacerbated by the pandemic and has 4 main aspects:
- The lockdowns of the global population has increased the demand for home electronics. Therefore, the uptick in demand of products with chips is worsening the strain. In particular, the sale of laptops and cameras is the largest that has occurred in the last ten years.
- The second important reason are the difficulties between America and China when the US government threatened to cut China off. In turn, the Chinese stockpiled supplies so that they could cope with a possible transitional period. Which means that a large portion of chips is leaving the market immediately.
- Furthermore, significant market volatility arose with the pandemic as well, as orders for goods are in constant flux. For example: the car manufacturers, while preparing for orders at the close of 2019, were rejected by major producers such as Apple and Intel. After all, the market was already struggling to produce chips.
- The fourth and final important factor is the adverse weather conditions that hit Texas and Taiwan. The two sites mentioned are 2 of the largest producers of raw materials in electronic devices. Taiwan is facing huge water shortage problems unlike any that has occurred in recent years. While Texas has suffered significant losses due to ice and power outage issues which were faced on February 2021.
The difficulty of production
Semiconductor chips are initially created in installations that are usually worth millions and operate 24 hours a day. Production time averages about of 3-4 months at best, to create a few million chips which should achieve their required success rate. Also, their production consumes vast amounts of water and electricity. It’s a very fragile process that can be damaged by the smallest incident.
Apple and Samsung
So in turn, the flagships of the chip market make their own moves to evolve alongside the market. Apple, as the largest chip market company, will obviously be the first to receive supplies and remain in production. This move is reasonable, as the lack of chips from last year resulted in the delay of the iPhone12. Samsung on the other hand is the second in the market. Samsung states that the release of her next high-end smartphone will probably be delayed due to this problem.
Competition and development.
With this current state of the market, all countries are chasing the development and creation of facilities in order to solve the problem. This way, they will at least have movement of chips in their own market.
When we read about Nvidia, Intel and other companies, it concerns the companies that have designed their own products, but need the semiconductor chips for them. The largest chip producers in the world are Taiwan (TSMC), Samsung and Intel. Equally interesting is the fact that these companies are now pushing competitively in order to chase market movement and find the biggest profits. More and more companies are investing in facilities, as it seems that the creation of necessary electronics is at the current king of the market.
Finally, even governments invest more money and set goals to boost their economies. Biden recently announced the establishment of TSMC and Samsung facilities in Arizona and Texas following a plan to update US goods. China is also trying to boost the chip market and the production it has as a country. They are experiencing a slight delay though, as its chip design is not as technologically advanced as the rest of the world. This started when Trump wanted to prevent the Chinese market in America by banning Xiaomi. In turn, China has tried to develop in this area so that it does not depend on other countries, but it seems that it has a lot of room for development.