Global crisis - Semiconductor chip shortage 2021: Cause, Impact and Alternatives

Let’s understand the reasons for semiconductor shortage in India, and across the world, along with the affected industries and how does it impact the prices.

 

Semiconductor shortage

 

What is Semiconductor chip?

Chip, also known as Microchip, semiconductor, processor or integrated circuit, is an impossibly small piece of silicon, usually a few hundred square millimeters — the size of a fingernail.

 

Chips are used to control the flow of electricity and are embedded in most things around you — rice cookers, washing machines, X-ray machines, cars, phones, laptops, LED bulbs, ATM's, trains, etc. Any electronic device that uses electricity and/or connects to the internet needs chips to operate.

 

What caused a semiconductor shortage?

The semiconductor supply crunch has been caused not due to a single incident or disruption. Instead, a confluence of events contributed to the situation with the COVID-19 pandemic being the primary reason. Other causes have been attributed to the China–United States trade war and Taiwan drought.

 

More recently, bad luck has exacerbated the problem. An atrocious winter storm in Texas shutdown semiconductor factories, and a fire at a plant in Japan caused similar delays.

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How does the chip shortage impact the prices and Industries?

Global chip shortage has made things difficult for more than 169 industries, and one of the consequences is the increase in price of everyday appliances and electronic goods - from TV to smartphones - for consumers.

 

Semiconductor Component Shortage has taken a big Hit on Automobile and Consumer Electronics Market

 

Automobile Industry: A modern car may have 1400-3000 chips. Cars consume 15% of world chip production. The shortage of semiconductor chips has forced carmakers to increase the prices of vehicles. In India, Maruti Suzuki hiked car prices recently due to the increased cost of production
Electronic Industry: Electronic firms like AMD, Qualcomm, Sony, and other electronics firms too have been facing chip shortages. With electronic companies working on increasing production, there is no sign that the demand for semiconductors is going to slow down.

 

South Korean consumer durables and electronic products giant Samsung recently said that the chip shortage has hit its television and appliance production. Companies like Apple, LG and other Chinese electronic and smartphone manufacturing companies have also been severely impacted by the chip shortage.

 

The global hardware components shortage isn’t just plaguing the PC market (computers, business laptops, servers and more), but also Mnkerers, prototypes, arMsts, and students making their own projects are also getting hit hard because of the micro controllers and single board computers like Raspberry Pi, Arduino, Jetson Nano as well. These boards are in increasingly short supply as demand has exploded and lead Mmes have increased for a wide range of components leading to delays through 2021.

 

And while the global semiconductor shortage continues, consumers will olen find few alternatives like Microbit, Wity Fox etc. However these alternatives may solve the issue and demand gap temporarily, it may be difficult to be able to fill in the gap if the semiconductor crisis doesn’t resolve.

 

Is semiconductor shortage the reason for many electronic components being out of stock and with a long lead time? 

Undoubtedly YES! Let’s understand the global leaders take on this

 

Limor Fried, founder and CEO of Adafruit says - “It's definitely been a challenge for small electronic manufacturers, makers, creators and inventors. We're seeing massive shortages of semiconductors and particular, microcontrollers and more-complex ASICs are completely unavailable. We've seen some micros come back with lead Mmes in 2023!”

 

Fabio Violante, CEO, Arduino says - “As a manufacturer of electronics devices, we rely a lot on the supply of semiconductors, as well as PCBs, connectors and a wide variety of components”

 

Jan Malasek, president, Pololu - “We are definitely feeling the parts shortages, with some ICs already on order for over a year”

 

Dean Diamond, supply chain manager, SparkFun says - “Component shortages have impacted our business for the past 18 months. We've had to get creative, both with our current products, as well as new products in development. Timelines have been pushed and product launches rearranged in order to work with component supply that is available to us”

 

"Consumers may need to be prepared to accept different products or versions of products, or wait to receive products," Alan Priestley, research vice president at Gartner, tells ZDNet.

When is it expected to ease?

The global chip shortage is a much bigger problem than everyone realized. And it will go on for longer.

 

The chief executives of Intel and IBM have both said recently that the chip shortage could last two years.

 

Soumitra BhaRacharya, MD, Bosch, recently told Business Standard that the shortage of chips will impact the car market Mll 2022. To cope with the chip shortage, carmakers are now leaving out high-end features, reported Bloomberg.

 

It means that all sorts of people could continue to experience delays and disappointment for months to come.

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