How the Global Chip shortage is hurting the tech industry

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The ongoing global chip shortage crisis is affecting a huge number of companies in a wide variety of industries ranging from automotive to video game consoles. The extent of the causes for the chip shortage varies massively, namely the COVID19 pandemic which closed factories due to lockdowns, an ongoing trade war between the US and China, along with a few more minor issues such as a factory fire in Japan at a supplier of microcontrollers which is responsible for 30% of the world’s units used in cars and a general rise in costs of raw materials such as copper.

Chip Shortage costing industries billions

This is causing a nightmare for tech manufacturers who are desperate to bounce back from a difficult 2020 with a bumper 2021 but the return to full production has yet to cover the shortfall in chips. Many insiders are expecting the shortage to last long into 2022 and possibly into 2023. ZDNET are reporting that the auto industry alone is losing up to $210 billion in revenue. Multiple manufacturers including Ford, Tesla and General Motors have car parks full of brand-new vehicles just waiting for their chips to be installed. The lack of available new vehicles has even led to a rise in price of used vehicles due to the demand.

Games console manufactures were expecting a bumper year thanks to the launch of the PS5 and Xbox Series X in the tail end of 2020 however both Sony and Microsoft are suffering from the chip shortage meaning they are struggling to meet demands for the new consoles. Due to the increase in demand for PCs and Laptops during the pandemic, (annual PC sales shot up 11%) the shortage is still felt throughout the industry with longer wait times and less options available when purchasing a new device.

The chip shortage has also affected Internet service providers with some seeing a delay of up to a year when ordering routers. This obviously prevents services from adding new subscribers risking lost sales in a highly competitive market. However, this shortage not only effects new subscribers, due to the increase in people working from home current customers are in search of faster internet speeds to cope with their new home working environment, thus requiring more powerful routers.

Like much of the current situation, things appear to be easing slowly back to normality, chip manufacturers are returning to full capacity, with some reporting to be working at up to 130% to combat the shortages. However due to the recent increase in requirement the backlog of shortages still remains high. Semiconductor manufacturers TSMC plan to spend $100 billion over the next three years on new fabs, Intel is investing $20billion in two new factories and SY Hynix is also increasing spending to combat the global chip shortage. However, some companies such as Apple, Amazon and Meta have decided this is too little too late and are opting to build their chips inhouse to help avoid shortages in the future.

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