The ongoing chip shortage is impacting everyone from carmakers to pc builders. When will we see relief? Experts say not any time soon. As chip demand increases, supply can't keep up. (Photo from Source Engine)
We remember all the toilet paper shortage at the start of the pandemic. Cleaning supplies were also in high demand. But COVID-19 also hit chipmakers pretty hard, and the repercussions are still being felt. A year later, we're in the middle of a chip shortage. It doesn't only affect hobbyists, computer builders, and gamers. It's also affecting automakers, and the shortage doesn't appear to be ending any time soon.
The pandemic isn't the only explanation behind the shortage. Many manufacturers scaled back production when COVID hit, thinking people would cut back during the crisis. Instead, the demand increased. But the biggest reason is there aren't enough chips to go around, nor are there enough chipmakers. Whereas 20 years ago, there was an abundance of chip companies, now most of them are outsourced.
The trickle-down effect of this has been monumental. Car companies like Ford and GM are forced to cut back on production, while Apple can't keep up with demand in its rollout of new products. Even more serious is the effect it could have on national security since drones, fighter jets, and other military components are impacted. The problem has gotten so bad President Biden had to step in and introduce an infrastructure bill that included $50 billion for semiconductor research and production.
Despite help from the government, experts warn the shortage could last until 2022. Baird's Ted Mortonson said as demand from telecommunications firms, the cloud sector, and 5G rollout continue to rise, the new capacity will need to come online to offset demand. Some semiconductor firms are trying to help by investing, such as Taiwan Semiconductor Manufacturing. The company pledged to invest $100 billion over the next three years in an effort to "increase capacity to support the manufacturing and R&D of advanced semiconductor technologies."
Still, experts predict relief won't come until the end of the year at the earliest. Ganesh Moorthy, CEO of Microchip Technology, said the shortage was the worst he's seen in the industry in 40 years. The "imbalance between supply and demand has never been this acute in all my history in this industry," he said. He added that the shortage has been "brewing for some time," with signs showing up as early as 2018.
It "takes six months of cycle time from when we say go to when production comes online full force," he said, so we shouldn't expect the shortage to end any time soon.
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