You probably don’t think much about computer chips on a normal day. They don’t brag or boast about how good they are. Instead these tiny pieces of tech work calmly inside millions of products, minding their own business and quietly transforming how we live and work.
They are also known as semiconductors – the building blocks of modern computation. A semiconductor is actually a material product usually comprised of silicon – one of the most common substances on the planet! Silicon is found in minerals that make up 90% of the Earth’s crust.
Today, computer chips plants are working flat out because right now there aren’t enough of them to meet our demand. As a result many popular products are in short supply. It has become almost impossible to buy a PS5 games console. Car manufacturers now have to limit production at their factories. Smartphones are feeling the squeeze too, with Apple warning the shortage will affect the sales of the iPhones.
So what’s going on?
Turns out the situation has been developing for years without our knowing. Prior to the pandemic there was the rise of 5G which increased demand and so the US made a decision to prevent the sale of semiconductors and other technology to Huawei – the largest 5G smartphone makers in China. Due to that, the Chinese firm quickly placed large orders to chip makers outside of the US. There’s also been an increasing demand for low cost chips so the 200mm wafer that make these chips are more sought after than ever
Then Covid-19 hit, people working from home needed more computers, tablets, webcams to do their jobs. Lo and behold, it led to some tech firms stockpiling and ordering the chips in advance and left others scrambling to acquire the components. Chip factories were also closed during lockdowns. Shipping was a great concern due to the rise in air freight fees and lorry driver shortage in Europe. Extreme weather events also play a role in this: A snowstorm in Texas shutdown semiconductor factories, a fire in Japan caused delays and a drought in Taiwan dried up manufacturers’ reservoirs.
It made us realise that everything connects to everything else. Without these chips, there will be no cars and other devices that rely on them. And we will face some real-world consequences.
How long will the shortage last?
Opinions have been varied. Some big tech CEOs are saying it could last more than 2 years. But one thing is for certain, things won’t get sorted overnight. Supply at the moment cannot keep up with demand. Consumers will feel the consequences, possibly a 10 to 15% price hike and extended delays where we have to be quite patient and wait it out.