All of you must have heard about the chip shortage in the recent news. The global chip shortage 2020-2021 is an ongoing crisis that affected multiple sectors. What do you understand from global chip shortage, then? Chip shortage, alternatively known as semiconductor shortage, arises when the demand for semiconductor chips becomes higher than the supply. This affects several industries, such as automobiles, cell phones, home appliances, video games etc. Any product you can think of having an integrated circuit is affected by the chip shortage. As a result, the production is slowed down or completely halted.
There are several instances where chip shortages have hit the global market. The following are the major factors that control the global and local chip shortage.
- Many a time, international agendas create chip shortages. In 1988, an agreement between American and Japanese chip manufacturers created a huge demand, leading to chip shortage. The workers in seven Hitachi corporation factories worked for the whole summer vacation to meet the demand. Moreover, China–United States trade war is considered to be a major factor in the 2020-2021 global chip shortage.
- A shift from one technology to another also creates the possibility of chip shortage. The technology shift introduces a new manufacturing process that requires a cleaner room (clean room). So, many initial batches of manufactured ICs are discarded due to fabrication errors. In 1994, there was a chip shortage for this reason. In 2012, Qualcomm released a statement that they were expecting a shortage in their Snapdragon chip due to the lack of 28 nm manufacturing facilities.
- Huge demand for a new product also creates chip shortage. This is because the factories for the product need time to be built, and the new factories are also not equipped enough to manufacture the products quickly. The shortage of smart card chips in 1999 is an example of such chip shortage. Another example is the lack of CDMA chips in 2004, when mobile phone companies widely introduced CDMA in both USA and India.
- Chip shortage can also be controlled by large industry players. For example, in 2000, Intel suffered a shortage of several products. So, multiple PC manufacturers switched from Intel to AMD microprocessors. However, this leads to the redesign of their products for multiple PC manufacturers.
- Natural calamities also play important roles in chip shortage. The Japan earthquake in 2011 created a severe local chip shortage for Japan as it was difficult to source different parts for different systems. Moreover, the major reason for 2020-2021 global chip shortage is Covid 19 pandemic and the Taiwan drought.