A tiny semiconductor helps power your phone, computer, and your car. A shortage crisis is leading to a major problem across industries. Here’s how the global chip shortage will affect you.
What can a semiconductor do?
Semiconductors are substances that can conduct electricity value between a conductor (example: metallic copper) and an insulator (example: glass). Silicon and germanium are some of the most common materials which belong to this category. Semiconductor chips are an integral part of all our electronics—from your phone to your car. You can also find them in your washing machine, refrigerator, and other everyday appliances.
In short, these small components hold a lot of power and their absence can adversely affect us. “I imagine there are more than 100 billion chips in daily use around the world. So think about how many transistors and semiconductors we use in our lives every day,” said Matteo Rinaldi. Rinaldi is a professor of computer and electrical engineering at Northeastern University.
What is the global chip shortage?
With the waves of the pandemic, factories, and plants across the world came to a halt. Hence, supplies required for manufacturing were unavailable for several months. The rise in demand for electronics toppled the supply chain apart. Orders piled up and manufacturers struggled to make enough semiconductor chips to meet the new demand. The backlog only grew. Why did this happen? “Bad decisions, bad luck, and then increased demand. Put those three together and you got a shortage,” said an expert.
Bad decisions by the auto industry led to them canceling orders. Hence, chip companies switched their purpose and tried to meet the explosive demand. Some large firms like Ford and Apple were able to predict their future needs and buy or block chips in advance. Hence, they already have the needed chips, or their orders will be delivered with a slight delay. But, manufacturing is not the only issue. The long shutdown in Asia led to bottlenecks due to the buildup of components to be shipped. Add transportation and labor issues plunged the supply chain further deep.
Side effects of the great shortage
“Prices are definitely going to be higher for a lot of devices that require a semiconductor. Some products are literally not going to ship, or they’re going to be delayed,” said David Yoffie. Yoffie is a professor at the Harvard Business School and a member of Intel’s board for over thirty years. The auto industry is one of the worst-hit industries. Automakers in the US will make about 1.5 to 5 million fewer cars.
However, despite stockpiling supplies in advance, Apple recently announced the delay in iPhone 13 and other Apple products. In addition to this, the price of electronics is skyrocketing. However, they are expected to go down with time. “Right now we have a global supply chain in crisis. We’ve just never ever seen anything of this magnitude impact us before,” said Patrick Penfield. Penfield is a professor at Syracuse University with expertise in supply chain practice.