2020–2023 global chip shortage

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For the subject in general, see Chip shortage.

The 2020–21 global chip shortage is an ongoing crisis in which the demand for integrated circuits (commonly known as semiconductor chips) is greater than the supply, affecting more than 169 industries and has led to major shortages and queues amongst consumers for cars, graphics cards, video game consoles, and other products that require semiconductors.[1][2][3][4]

Causes

The cause of the global chip crisis is a combination of different events with the snowball effect of the COVID-19 pandemic being the primary reason. Other causes have been attributed to the China–United States trade war and the 2021 drought in Taiwan.[5][6]

COVID-19 pandemic

Main article: COVID-19 pandemic
See also: Shortages related to the COVID-19 pandemic

The COVID-19 pandemic is the main cause of the global chip shortage. Due to global lockdowns, chip production facilities were shut down, leading to the depletion of stocks. Due to the pandemic, most people stayed at home and had to upgrade their electronic devices, such as webcams, monitors and computers, in order to work from home and be entertained.[7] In the fourth quarter of 2020, traditional computer sales saw a 26.1 percent growth over the previous year.[8]

China–United States trade war

Main article: China–United States trade war

In 2020, the United States government placed restrictions on Semiconductor Manufacturing International Corporation (SMIC), China's biggest chip manufacturer, which made it harder for them to sell to companies with American ties. These restrictions forced companies to use other manufacturing plants like Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Samsung. However, these companies were already producing at maximum capacity.[9]

Taiwan drought

See also: Semiconductor industry in Taiwan

Taiwan is the leader of the global semiconductor industry, with TSMC alone accounting for more than 50 percent of the global wafer foundry market in 2020.[10] In 2021, Taiwan experienced its worst drought in more than half a century, leading to problems among chip manufacturers that use large amounts of ultra-pure water to clean their factories and wafers. For example, TSMC's facilities used more than 63,000 tons of water a day, more than 10 percent of the supply of two local reservoirs.[11]

Renesas Electronics Corporation fire

A Japanese factory which supplies 30 percent of the global market for micro-controller units used in cars caught fire in March 2021. Renesas Electronics Corporation said it would take at least 100 days for them to get back to normal production.[12]

Rising prices of raw materials

There has been an increase in copper and other raw materials prices for 2020.[13]

Impacted industries

Cars

U.S. automobile production, 1993–2021

The average modern car can have between 1,400 and 1,500 chips, some even up to 3,000. Cars account for 15 percent of global chip production, while personal electronics account for around 50 percent. Chip revenues are even more skewed towards non-automotive sector.[14]

At the start of the pandemic, car manufacturers incorrectly predicted that sales would drop, canceled chip orders, and were unprepared to meet demand.[15] Chip manufacturers had more commitments from the tech sector, which reduced capacity for car chips.[14] Ford parked thousands of unfinished vehicles at Kentucky Speedway as the company waited for chips to finish assembling those cars.[16] Toyota planned to cut vehicle production worldwide by 40 percent in September 2021,[17] while General Motors announced it would halt production of almost all cars at its North American plants for a week or two that same month.[18] During the third quarter of 2021, there were only two-thirds as many new car sales in the United States as there had been during the same time period in 2020, as supply could not meet demand.[19]

Graphics cards and gaming PCs

The global chip crisis made it difficult to acquire a new graphics card,[20] while an increase in cryptocurrency mining in 2021 increased the demand even more.[21] Finding gaming PC components became more difficult and more expensive, and as gaming PCs rely on either AMD or Nvidia to make their discrete (sometimes called dedicated) graphics, both of those companies refreshed their lineups during the pandemic with popular new models that are very difficult to find[22] or priced 50 to 300 percent above MSRP.[23]

Video game consoles

During the COVID-19 pandemic, cinemas and theaters were closed to prevent the spread of the disease, leading many people to turn to home entertainment during periods of self-isolation,[24] which increased the demand for video game consoles.[24][25] With the release of the ninth generation of video game consoles coinciding with the pandemic, demand increased even further, with both Microsoft and Sony reporting record demand for their new consoles.[25] Microsoft expected in February 2021 that shortages of the Xbox Series X and Series S would continue until at least mid-2021,[26] while Sony warned in May 2021 that short supply of the PlayStation 5 console would continue into 2022.[27] Both companies use AMD chips manufactured by TSMC in their ninth-generation consoles, which puts extra strain on the supply chain. As supply problems persist, so-called scalpers are reselling the consoles on websites like eBay for 50 to 100 percent more than their retail price.[28]

Reactions

Governments

On February 24, 2021, U.S. president Joe Biden signed an executive order trying to address the chip shortage by reviewing options to strengthen the semiconductor supply chain.[29] Later in April, CEOs of major technology companies and U.S. government officials attended a virtual summit with the White House to talk about improving the resilience of the semiconductor supply chain.[30] In a new virtual meeting on September 23, 2021, which followed another meeting in May, the White House pressed automakers, chip manufacturers and others to provide information on the ongoing crisis that has forced cuts to U.S. automobile production, and to take the lead in helping solve it.[31]

On September 15, 2021, President of the European Commission Ursula von der Leyen trailed a forthcoming “European Chips Act” in her State of the Union address.[32] It was announced that the European Union will use legislation to push for greater resilience and sovereignty in regional semiconductor supply chains.[33]

Companies

On July 22, 2021, Intel CEO Pat Gelsinger said he expects the chip shortage will get worse in the second half of 2021 and that it will be a year or two before supplies return to normal.[34] On August 19, 2021, Jensen Huang, CEO of Nvidia, said he expects the shortage to continue well into 2022,[35] while AMD CEO Lisa Su said on September 27 that the shortage would improve throughout the second half of 2022, though she warned that supply would remain tight until then.[36] However, IBM CEO Arvind Krishna said on October 11 that any prediction of a resolution to the chip shortage by the end of 2022 is optimistic, and that he sees it "more likely" that the issue won't be fully solved until 2023 or 2024.[37]

On September 24, 2021, Taiwan's TSMC said it is actively supporting and working with all stakeholders to overcome the global chip crisis, after its participation at the White House virtual meeting on September 23.[38] Earlier in April 2021, TSMC announced that it plans to invest US$100 billion over the next three years to increase capacity at its plants,[39] days after Intel announced a US$20 billion plan to expand its advanced chip making capacity in Arizona.[40] Already in May 2020, TSMC announced its US$12 billion plan to build and operate a semiconductor fab in Arizona, their second manufacturing site in the United States.[41] Construction is underway as of June 2021, with chip production targeted to begin in 2024.[42]

On September 20, 2021, the CEO of U.S. automaker General Motors, Mary Barra, said that the chip shortage has forced supply chain rethink. Barra said that the company will source more semiconductors directly from chip manufacturers instead of suppliers to adapt to the ongoing global chip shortage.[43]

References

  1. ^ "Global shortage in computer chips 'reaches crisis point'". The Guardian. 2021-03-21. Retrieved 2021-10-17.
  2. ^ Howley, Daniel (2021-04-25). "These 169 industries are being hit by the global chip shortage". Yahoo Finance. Retrieved 2021-10-17.
  3. ^ Shead, Sam (2021-05-07). "The global chip shortage is starting to have major real-world consequences". CNBC. Retrieved 2021-10-17.
  4. ^ Leprince-Ringuet, Daphne (2021-05-04). "The global chip shortage is a much bigger problem than everyone realised. And it will go on for longer, too". ZDNet. Retrieved 2021-10-17.
  5. ^ Taylor, Emily (2021-03-23). "How COVID, Climate Change and Trump Created a Global Chip Shortage". World Politics Review. Retrieved 2021-10-17.
  6. ^ Pizzemento, Allie (2021-04-15). "The 2021 Semiconductor Chip Shortage: What, Why, and What's Next?". MAU Workforce Solutions. Retrieved 2021-10-17.
  7. ^ Miltenburg, Olaf van (2021-02-26). "Chiptekorten houden aan - De oorzaken en gevolgen". Tweakers (in Dutch). Retrieved 2021-10-17.
  8. ^ "PC Sales Remain on Fire as Fourth Quarter Shipments Grow 26.1% Over the Previous Year, According to IDC". IDC. 2021-01-11. Retrieved 2021-10-17.
  9. ^ Massie, Graeme (2021-02-11). "Major chip shortage caused by Trump trade war blamed for PS5 shortage". The Independent. Retrieved 2021-10-17.
  10. ^ "Taiwan to remain largest semiconductor material market in 2020, 2021". Focus Taiwan. 2020-09-22. Archived from the original on 2020-09-23. Retrieved 2021-10-03.
  11. ^ "Taiwan is facing a drought, and it has prioritized its computer chip business over farmers". The New York Times. 2021-04-08. ISSN 0362-4331. Retrieved 2021-10-17.
  12. ^ "Global auto recovery to take more hits from Japan chip plant fire, severe U.S. weather: IHS". Reuters. 2021-03-31. Retrieved 2021-10-10.
  13. ^ "Metals Hit Record High, Zinc Soars as Energy Crisis Cuts Supply". Bloomberg.com. 2021-10-14. Retrieved 2021-10-22.
  14. ^ a b "Stock take: Experts drill into the motor industry's chip issues". Autocar. 2021-09-20. Archived from the original on 2021-09-21. Retrieved 2021-10-17.
  15. ^ Bicer, Aysu (2021-03-31). "Automakers' chip crisis spreading to other sectors". Anadolu Agency. Washington. Retrieved 2021-09-04.
  16. ^ Holderith, Peter (2021-05-05). "Stockpile of Unfinished Ford Super Duty Pickups Missing Chips Is Now Visible from Space". The Drive. Retrieved 2021-05-14.
  17. ^ "Chip shortage: Toyota to cut global production by 40%". BBC News. 2021-08-19. Retrieved 2021-09-02.
  18. ^ Isidore, Chris (2021-09-03). "GM shutting down production at most of its plants in North America". CNN Business. Retrieved 2021-09-04.
  19. ^ Isidore, Chris (2021-10-01). "Car sales plunge as chip shortages choke off supply". CNN Business. Retrieved 2021-10-02.
  20. ^ Vicente, Vann. "Why Is It So Hard to Buy a Graphics Card in 2021?". How-To Geek. Retrieved 2021-10-17.
  21. ^ "Crypto-miners are probably to blame for the graphics-chip shortage". The Economist. 2021-06-19. ISSN 0013-0613. Retrieved 2021-10-17.
  22. ^ Dragan, Lauren; Cunningham, Andrew (2021-03-08). "A Silicon Chip Shortage May Delay Headphones and Game Consoles, but Don't Panic". Wirecutter. Retrieved 2021-10-03.
  23. ^ "GPU Market Pricing Back in Uptrend, Shattering Expectations of Price Normalization". TechPowerUp. 2021-08-30. Retrieved 2021-10-17.
  24. ^ a b Clement, J. (2021-06-04). "Increase in video games and consoles sold due to coronavirus worldwide 2020". Statista. Retrieved 2021-10-19.
  25. ^ a b "The COVID-19 Consoles Thriving in Lockdown". PricewaterhouseCoopers. Retrieved 2021-10-19.
  26. ^ Cryer, Hirun (2021-02-02). "Xbox Series X and Series S shortages are expected until at least June 2021". GamesRadar. Retrieved 2021-06-01.
  27. ^ Takashi, Mochizuki (2021-05-10). "Sony Warns Tight PlayStation 5 Supply to Extend Into Next Year". Bloomberg. Retrieved 2021-10-17.
  28. ^ Murphy, Mike; Levy, Karyne; Hashim, Shakeel (2021-03-16). "Can consoles overcome the chip shortage?". Protocol. Retrieved 2021-10-17.
  29. ^ "Biden signs executive order to address chip shortage through a review to strengthen supply chains". CNBC. 2021-02-24. Retrieved 2021-09-21.
  30. ^ Hatmaker, Taylor (2021-04-12). "Tech and auto execs tackle global chip shortage at White House summit". TechCrunch. Retrieved 2021-10-17.
  31. ^ Shepardson, David; Nellis, Stephen; Alper, Alexandra (2021-09-24). "White House prods companies on chips information request". Reuters. Washington. Retrieved 2021-10-17.
  32. ^ "2021 State of the Union Address by President von der Leyen". European Commission. 2021-09-15. Retrieved 2021-10-02.
  33. ^ Lomas, Natasha (2021-09-15). "Europe plans a Chips Act to boost semiconductor sovereignty". TechCrunch. Retrieved 2021-10-02.
  34. ^ Martin, Dylan (2021-07-22). "Intel Expects CPU Shortage To Worsen In Q3 As PC Sales Grow". CRN. Retrieved 2021-10-17.
  35. ^ White, Monica J. (2021-08-19). "Nvidia CEO Expects Chip Shortage to Continue Throughout 2022". Digital Trends. Retrieved 2021-10-17.
  36. ^ Leswing, Kif (2021-09-27). "AMD CEO Lisa Su says chip shortage likely to end next year". CNBC. Retrieved 2021-10-17.
  37. ^ Alspach, Kyle (2021-10-11). "IBM CEO Arvind Krishna: Chip Shortage 'More Likely' Continuing Until 2023 Or 2024". CRN. Retrieved 2021-10-17.
  38. ^ "Taiwan's TSMC says working to overcome global chip shortage". Reuters. Taipei. 2021-09-24. Retrieved 2021-10-17.
  39. ^ "TSMC to invest $100 billion over 3 years to meet chip demand". Reuters. Taipei. 2021-04-01. Retrieved 2021-10-17.
  40. ^ "Intel Announces Major Expansion in Arizona". Business Wire. Chandler, Arizona. 2021-03-24. Retrieved 2021-10-17.
  41. ^ "TSMC Announces Intention to Build and Operate an Advanced Semiconductor Fab in the United States" (Press release). Taiwan Semiconductor Manufacturing Company Limited. 2020-05-15. Retrieved 2021-10-17.
  42. ^ Nellis, Stephen (2021-06-02). "TSMC says has begun construction at its Arizona chip factory site". Reuters. San Francisco. Retrieved 2021-10-17.
  43. ^ Scammell, Robert (2021-09-20). "General Motors CEO: Chip shortage has forced supply chain rethink". Verdict. Retrieved 2021-10-17.
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