You might have experienced delays with buying a game console or a dishwasher or even a car, and you might be wondering why? This diverse range of products has one thing in common. All these products contain silicon chips which are currently impacted by a world shortage of these chips. The main cause of these shortages is demand outstripping supply. You are probably asking how did this happen?
How Did The Silicon Chip Crysis Begin?
Many manufacturers were forced to close down at the start of the pandemic, cutting production until the could factories could be reopened. Severe winter storms further impacted production in Texas during February 2021.
At the same time, the production was impacted. Demand for Silicon chips was growing, but why?
Why Is Chip Demand Growing?
The Pandemic itself increased demand. More of us were working remotely. Forcing businesses to buy IT equipment to ensure they could continue to run. At the same time, Individuals have had more free time and were buying consumer products. This growth in demand was encouraged by the release of new products.
New Products
A number of new products have been launched during the last year.
Both Microsoft and Sony have launched new games consoles this year. Sony sold 4.5 million PlayStation V in 2020. While Microsoft has sold
Both Nvidia and AMD have launched a new generation of graphics cards and, according to reviews, are a major improvement on the previous generation. Demand for these graphic cards is not just limited to PC game players but also crypto miners due to the increasing value of cryptocurrencies.
This is on top of the annual release of new technology such as smartphones and Television.
What Is The Impact Of The Chip Shortage?
Unsurprisingly, the shortage of silicon chips could impact the supply of any item containing a silicon chip. It could be a car, a kid’s toy, or a computer. One of the first industries to be impacted by this crisis was car manufactures. The entire car industry spends $37 billion on silicon chips each year. Ford has predicted that the supply shortage could hit its profits by $2.5 billion.
Samsung, which is one of the biggest silicon chip manufacturers, is rumoured to be delaying the launch of this year’s release of the Samsung Galaxy Note until next year.
How Will The Chip Crysis Be Resolved?
As we highlighted earlier. The silicon chip supply crisis is due to supply not keeping up with demand. The only real solution will be to increase supply. New factories are already being planned each costing several billion pounds. The new capacity won’t be available for at least a couple of years.
This is likely to be helped further by both the US and Chinese governments planning to invest in the manufacture of silicon chips within their own countries. The US government is looking to invest up to $37 billion as part of a 100-day review into the supply chain. At the same time, China invested $35.2 billion in 2020. A 407% increase over the previous year. Due to the ongoing trade war with the US.
Conclusion
As I have stated earlier in this article. The silicon chip crisis is due to demand outstripping supply. Nvidia has recently reported that they think the current crisis will likely last until the end of the year. Lack of supply is likely to increase the cost of silicon chips.
Have you yourself been impacted by the silicon chip shortage?