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Why the Global Shortage in Computer Chips Matters to You

What? A global shortage in chips? Delays? Higher costs? Whatever happened to Moore’s Law?

Read on. Moore’s Law only holds when chip supply isn’t an issue. Just now, the microchips that make every electronic device work are in short supply. The COVID-19 pandemic and unexpectedly cold weather in Texas temporarily closed chip factories. As news of the shortage spread, “panic buying” cleaned out inventory. Several other factors drive a continuing shortage as well:

● The switch to 5G phones is increasing chip demand, leading to delays:

Even the mighty Apple, a $2tn company and the world’s biggest buyer of semiconductors spending $58bn annually, was forced to delay the launch of the much-hyped iPhone 12 by two months last year due to the shortage.

Mark Sweney, “Global shortage in computer chips ‘reaches crisis point’” at The Guardian (March 21, 2021)

Samsung also warns of prospective chip-related cutbacks and delays for its new smartphone: “it might skip the launch of the next Galaxy Note smartphone, to streamline its lineup.” (BBC, March 17, 2021)

● Remote learning and working from home have also led to a spike in consumer demand for hardware and thus chips.

● Demand for chips from the automotive sector has spiked, due to new onboard technologies. But in the IT industry, automotive is a smaller player. The entire automotive industry spends only $37 billion on chips yearly. So, as one analyst explains, “if Apple is spending $56bn a year and growing who are you going to keep supplies going to first?” Ford, Nissan, and Honda have all seen slowdowns as a result, as have Volkswagen and General Motors, along with Subaru and Toyota. A fire at a Japanese chip maker responsible for 30% of microcontrollers for cars has made things worse. So expect fewer new models, higher prices, and longer delays.

selective focus man showing black, metallic microchip

● Sony tells much the same story with respect to game consoles such as Playstation 5: “It is difficult for us to increase production of the PS5 amid the shortage of semiconductors and other components,” said Sony CFO Hiroki Totoki. Nintendo’s Switch and Microsoft’s Xbox are also facing supply shortages due to chip woes.

● One hard hit group is people who build their own computers. From Gizmodo, we learn,

It’s the worst time to try and pick out the parts for your next PC build. Actually, it’s the worst time to try to buy anything that involves a graphics card or processor. Major component manufacturers, including Nvidia, TSMC, and Intel, have confirmed the global chip shortage is unlikely to let up for …awhile.

Florence Ion, “You’ll Probably Have to Put Your Next PC Build on Hold as the Chip Shortage Continues” at Gizmodo

The chip industry thinks the problem will take several years to resolve. For one thing, “Factories that produce wafers cost tens of billions of dollars to build, and expanding their capacity can take up to a year for testing and qualifying complex tools.” (Reuters) Intel nonetheless hopes that the problem will be resolved by 2023, in part via new chip factories in Arizona. TSMC, which makes chips for Apple, AMD, and Qualcomm is also building a factory in Arizona, forecasting a two-year delay. Most current production is in Asia, where Taiwan, threatened by China, is a leading producer.

In the meantime, expect delays, shortfalls, and higher prices for cars, phones, and appliances, excuses — and the need for patience.

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Why the Global Shortage in Computer Chips Matters to You