Key Points:
- Automotive chips shortage fostered 6-7 million fewer vehicles production globally
- COVID-19 bestowed upon the global crisis of semiconductor shortage in 2021
- Commodities’ dependency on chips will result in an impacted global trade state
- “European Chips Act” and Intel Corporation investment will reduce chips shortage
Global semiconductor shortages have outgrown themselves since the pandemic. Analysts say that shortage of semiconductors will not settle down till a year or two. Microchips shortage have impacted the automotive industry the highest among all industries in terms of monetary values. 6-7 million fewer vehicles are expected to be produced globally due to automotive chips shortage.
Semiconductor chips shortage is impacting industries worldwide to meet the demand for several commodities and the economy is jabbed because of this. Electronics are the highest demanded commodities in today’s era, and the “digital revolution” has its significance in our tech world utilising more technology and less labour… A semiconductor is the brain of all electronics.
Semiconductor Manufacturing Companies and Production
Semiconductor chips are made mainly of silicon, a metalloid used in manufacturing several electronic devices. Assembling a semiconductor requires a series of processes and a long duration of three to four months by experts. Shown below is semiconductor trade data with the top semiconductor manufacturers and their approximated share value in exports of semiconductors.
Why Semiconductor Is Required?
Semiconductor chips are present in nearly every electronic device used in homes, offices, transportation, agriculture, communication, and even the one you might be using right now — your computers (smartphones, tablets, and desktops). Semiconductor shortage leads to the decline in the semiconductor trade among the international market regions affecting other commodities.
Semiconductor exports by country with each other will record less trade in the commodities such as – electronics and their parts (85), vehicles and their parts (87), instruments and apparatus for optical, photographic, medical purposes (90), industrial machinery and parts (84). To be noted, electronics recorded the highest imports in 2020, occupying 16.8% global share value among all the commodities. Semiconductor shortage 2021 is wrecking global trade.
Semiconductor Shortage Cause
In 2019, a piece of news circulated that 8 billion metric tons of silicon were consumed for different manufacturing. That was probably the first instance indicating chips shortage ‘might’ coming up in the future.
Fast forward to the last year when COVID-19 jabbed the world during the first quarter of 2020. The majority of trade flows were disrupted due to the lockdown restrictions imposed by the government of several countries. Production of semiconductors and many other components halted during the pandemic.
Since every electrical appliance has semiconductor components as their core mechanism to work (as aforementioned), the already disrupted production resulted in a vigorously fluctuating supply-demand condition of the semiconductor to the manufacturing units of companies.
Bottom-Line
Several factors have played their part in the global semiconductor shortage. Conclusively:
- Raw materials were not enough to manufacture,
- Lockdown parameters disrupted the productions,
- Workers unavailability due to positive cases,
- Demand for electronic devices surged drastically,
- Shipping-logistic companies halted shipments,
- Billion dollars loss for the companies to manufacture,
- Factories in Texas shut down due to winter storms,
- Fire in a Japanese factory resulting in huge setbacks.
Last but not the least, trade wars between countries, are simply not making anything easy. For example, the US-China Trade War where the US is a leader in chip’s R&D activities and China is the top exporter for semiconductors.
Here’s a glimpse of China semiconductor exports in 2020 and 2021 in trade data of semiconductor exports by country revealing China’s semiconductor trade share values –
EU has welcomed new legislation to build greater resilience for coming up with measures to eliminate the global semiconductors shortage with the introduction of the “European Chips Act”. Intel announced in February to invest $20 billion in building plants for chips’ manufacturing.
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Global Chip Shortage Situation Is Likely To Improve Over Time
