During lockdowns due to the Covid-19 pandemic, consumers rushed to computers, tablets or game consoles, which work with chips. Meanwhile, tech giant Huawei, seeing the trade war between China and the United States escalate, stockpiled semiconductors last year, increasing the pressure on supply.
These tensions in the market became glaring as automakers sought to source more semiconductors, and realized that manufacturers were prioritizing consumer electronics. The automotive industry is the most visible victim of the chip shortage to date, with giants like Ford and Volkswagen forced to cut production, but other sectors are also affected.
“The combination of the coronavirus storm, inventory spikes due to the trade war, and the paradigm shift of telecommuting is causing a shortage of semiconductors,” says Neil Mawston, executive director of consulting firm Strategy Analytics, to AFP. “Everything that has a chip is affected, cars, smartphones, game consoles, tablets and laptops.”
“Electronic goods and vehicles will be produced in fewer numbers and will be more expensive in 2021,” he predicts.
Shipments of some iPhone 12 models have been limited due to a lack of components, according to Bloomberg. While a deficit of certain chips has been invoked to explain the difficulties in obtaining the new PlayStation 5 from Sony and the latest Xbox console from Microsoft. Several semiconductor manufacturers, such as the American giant Qualcomm and its competitor AMD, are warning of a growing crisis.
The semiconductor supply chain is complex. The American giants, which supply manufacturers of consumer electronics, design the components but for the most part do not manufacture them. Asian subcontractors, such as Taiwan Semiconductor Manufacturing Company (TSMC) or South Korea’s Samsung, manage most of the production lines.
Manufacturers also have difficulty meeting demand from different sectors as a change in production mode can take them months.