In July, Sony delayed the launch of a new camera, citing chip availability concerns. The idea of one of the world’s largest electronics companies postponing something like that at a few days’ notice is pretty extraordinary — to say the least.
Similarly, General Motors is again halting the assembly lines of several pickup truck plants because the company doesn’t have enough computer chips. The plants were back up and running for just a week following a shutdown in July, also caused by the global chip shortage.
So, What’s Going On with the Global Chip Shortage?
Since the summer of 2020, the semiconductor industry has found itself in a massive supply-side shortage situation. The sector was already primed for tightness before the COVID-19 pandemic arrived due to the prolonged trade tension between Beijing and Washington.
When the health crisis struck, it exacerbated the situation in two ways. First, manufacturers had to deal with the same coronavirus operating challenges as everyone else. At the same time, demand for many chip-fitted electronics surged in the era of working and generally staying at home.
Finally, Taiwan suffered a terrible drought in early 2021, making it difficult for the many chip-building factories on the island to get their hands on large amounts of ultra-clean water.
The global chip shortage is holding back many industries, as equipment ranging from smartphones to modern cars to medical devices requires an abundance of freshly built semiconductor chips.
The influence of the pandemic on demand for computer equipment, with countless more people working from home than usual, is easy to understand. One of the less predictable outcomes was desktop computers – a market long in decline – picked up considerably.
In 2021, it’s certainly possible for people to run the classic combination of web, word, and email on a laptop, tablet, or even an enterprising smartphone. However, doing that all day every day on a real computer, is a lot less provoking of eyestrain. And while all that demand was happening, many people were staying home to minimize exposure to the virus, so a lot of chips didn’t get made.
Which Sectors Are Most Affected By the Global Chip Shortage?
The shortage has affected a wide range of business sectors, including delaying shipments of Sony’s new PS5 games console and restricting TV and other OLED display supplies.
The chip shortage is also wreaking havoc on auto production, with production lines globally forced to close for weeks at a time due to a lack of components. Ford is predicting more factory shutdowns in the coming months, while the shortage has led Jaguar Land Rover to half its sales expectations for 2021.
Disruptions in the global supply chain in the wake of the COVID-19 pandemic are hitting even the best-prepared companies. Toyota, Japan’s largest car-maker, announced it was cutting production in the country by 40% in September because of a shortage of semiconductors.
The impact of the supply crunch is spreading to consumer tech. Apple CEO Tim Cook warned that a limited supply of semiconductors would hurt sales of iPhones. Microsoft is struggling to make enough Xbox consoles and Surface laptops. And last month, Elon Musk told a court that the chip shortage meant Tesla would only be able to manufacture about half as many Powerwall home batteries as it thinks it can sell.
Recovery Will Take Some Time
Historically, the semiconductor industry has been split between the laboratories that design them and the fabrication facilities (a.k.a. fabs) that make them. In his second-quarter call, Intel CEO Pat Gelsinger explained how he expects the semiconductor industry’s recovery to play out:
“While I expect the shortages to bottom out in the second half, it will take another one to two years before the industry is able to completely catch up with demand. IDM 2.0, which combines our internal manufacturing capacity with the use of third-party foundries, best positions us to weather these challenges and work with our ecosystem partners to build a more resilient supply chain. With major fab construction projects underway in Oregon, Arizona, Ireland, and Israel, we are investing for the future. But we are also taking action today to find innovative ways to help mitigate industry constraints.”
But build-outs take time, especially when there is a global pandemic and regional climate challenges. The semiconductor sector will get back to business as usual, just not anytime soon.
Potential Solutions to the Problem
In June, the US passed a new vote for the Innovation and Competition Act. The focal point of the bill is a $52 billion investment to spur new domestic production of semiconductors. The bill claims to offer a vast opportunity to electrical engineers to fund research into new chip technologies and applications.
Universities are also trying to tackle the chip crisis. Specifically, Stanford University aims to create a way to reduce the obstacles between academic discoveries and practical technologies.
The university’s outstanding facilities are looking to train Ph.D. students to become next-generation chip experts who could drive semiconductor technologies forward. It hopes to democratize integrated circuit (IC) design by creating a national “lab to fab” infrastructure. Although the solution offers an excellent opportunity for electrical engineers at the university, it will likely be a lengthy effort to resolve the chip shortage.
Our Electronics-dependent Economy Relies on Chips — You Can Rely on Jungle!
The lack of semiconductors affects a range of industries, including advertising. The chip shortage is limiting the availability of digital equipment, including lighting and screens for ads. However, Jungle Communications remains up and running and able to provide the equipment you need to market your business effectively.
Innovative Companies Find Innovative Solutions
We partner with Panavid, a leading provider of custom audio and visual integration, to help meet our clients’ ongoing needs. Together, we create custom client solutions including:
- Offering clients compatible substitutions from different manufacturers
- Utilizing Panavid’s own backup equipment while waiting for inventory delivery
- Working directly with manufacturers to develop alternative solutions
Although the market situation seems grim at the moment, we have seen that it has pushed companies into thinking alternatively which will bring innovation and progress in the long run. Our team has the experience, creative capacity, resources, and drive to provide the tangible results you need to market your business successfully. Contact us to learn more!