Semiconductor shortage: The reasons for the shortage and the impact

In the recent months, there has been a shortage in semiconductors. Semiconductors, widely known as chips, are the heart of many gadgets, ranging from our phones to vehicles on the road. 

Even though chips are an American invention, the percentage of chips manufactured in the US have decreased significantly. As reported by Popsci, “In 1990, 37 percent of chips were made in America. By 2020, that number was only 12 percent.” In fact, the majority of chips are manufactured in Asian countries, with 90 percent of all chips being made in Taiwan. 

With the outbreak of COVID-19, many major Asian ports have shut down, including China’s Yantian Port. This has significantly slowed down the distribution of chips as container ships can no longer pass through, leaving many chips sitting in packaging for months on end. Additionally, there is a lack of workers due to the pandemic, further postponing the distribution of chips.

There are also other factors that have increased chip shortage, including those of natural disasters. After all, according to Marketplace, “…one of the major chip suppliers in Japan had a fire. Texas, for Intel, had a problem with the winter storms. And in Taiwan, which is one of the largest producers in the world of these chips, they’re having a drought — and making computer chips requires lots of water, so they have been impacted…” 

This shortage has also taken its toll on major manufacturers, specifically vehicle manufacturers. According to an article by Headlights, “In total, the chip shortage caused 2 million to 5 million fewer vehicles produced.” This also limits availability of certain models, as well as making the few available models increasingly more expensive than they were before.

Vehicle manufacturers aren’t the only ones to be hit with this dilemma. Smartphone manufacturers are also feeling the impact of the chip shortage, CNBC stated, “…to shave 10% off of device makers’ production forecasts.” While that doesn’t seem like much of an impact, it will guarantee higher prices and lower availability of products for consumers.

In fact, consumer demand is only increasing as the days go by. According to a consumer graph from Statista, “With the drastic decrease of smartphone sales in 2020 (from 1,544.66 million units in 2019 to 1,378.72 million units in 2020), sales have been picking up again (1,535. 36 million units in 2021).” 

Additionally, car sales have also been steadily increasing, with a consumer graph from Deloitte reported a “12% increase in the US since 2020.” However, with the chip supply in peril, manufacturers may not be able to keep up with consumer demand.

It is uncertain whether the shortage will end in the near future, or whether it will drag out.  Regardless of the situation, many aisles will be left empty, with prices rising for the few products that are left available, leaving the hands of consumers empty.