Why No One Can Really Say When the Chip Shortage Will End

Why can no one really say when the chip shortage will end? Well since the global chip shortage began, many industry executives and commentators have ventured to estimate when it might come to an end.

Why No One Can Really Say When the Chip Shortage Will End

It is universally accepted that the shortage came about as a result of an unfortunate confluence of factors, from pandemic-related manufacturing shutdowns and increased demand for electronics, to bottlenecks in the freight sector and freak weather events.

Since the beginning of the pandemic, the demand for microchips has far exceeded supply, causing problems in every industry that relies on computers. And if you’re a Decoder listener, you know that that is every industry.

Right now, major automakers have unfinished cars sitting in parking lots waiting for chips to be installed. Game consoles like the PS5 and Xbox Series X are impossible to find. And even things like microwaves and refrigerators are impacted because they contain simple controller chips.

Why No One Can Really Say global chip shortage

Although there is agreement on causation, there is little consensus when it comes to assessing the extent of the problem and defining a timeline for recovery. Some say the shortage will ease up next year, others say problems will persist until 2023 and beyond.

The cause of the global chip shortage

The global chip shortage was prompted by the Covid-19 pandemic and the surge in demand for electronics. Consumers and businesses started buying new laptops and servers to cater for staff working remotely and children being home-schooled.

So, whereas worldwide semiconductor sales declined between 2018 and 2019, in 2020 sales grew 6.5%. This rapid growth has continued in 2021, and according to trade organization the Semiconductor Industry Association, sales for May 2021 were 26% higher than the same time last year.

Sectors Affected By the Global Chip Shortage

The shortage has affected a wide range of business sectors, delaying shipments of Sony’s new PS5 games console, as well as restricting the supply of TVs and other OLED displays.

The automotive industry has been hit particularly hard, with production lines around the world having to close for weeks at a time due to a lack of components.

The shortage for automakers appears to be worsening, with both Ford and General Motors announcing prolonged shutdowns of plants across North America, while it has led to Jaguar Land Rover halving its sales expectations for 2021.

What is being done to solve the global chip shortage?

With demand for semiconductors likely to continue to increase as more industries undergo digital transformation, chipmakers, and governments are working to build more capacity into supply chains.

The European Union states have also agreed to try and grow chip building capacity across the bloc, but the UK government has yet to reveal any plans to help its domestic semiconductor sector.

Indeed, the UK’s biggest chip factory, Newport Wafer Fab, is now in the hands of the Chinese after a take-over by Nexperia. You can get more details on the Chip shortage and possible solutions here.


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