How long will the chips supply problem last?

What are semiconductors? Most digital electronic devices get powered by them. They contain silicon and are critical to the manufacturing of microchips.

The shortage started in the first half of 2020 when consumer demand for cars declined during the covid-19 lockdown. On the other hand, the demand for computer equipment and mobile devices grew, and microchip manufacturers shifted their attention to these markets.

Microchips became necessary for communication platforms like zoom, video streaming services, 5G, and cloud-based services. However, the return on investment wasn't compelling enough to build more foundries to meet the demand. It is estimated that the auto industry will lose 100 billion dollars’ worth of sales because of the covid crisis and the chip shortage.

As the pandemic recedes, a gradual recovery will extend throughout this year and into 2023. Manufacturers are referring to structural problems with demand. Automakers will not have high sales because of production issues. Some estimates indicate that the global chip shortage impacted 169 industries.

The tech industry is among those suffering because of the chip shortage. One example is Apple that cut the production of the iPhone 13 by 10% they also cut production of the iPad in half and they are recycling parts from older iPhones.

Nintendo cut production of Switch consoles by 20%, this impacted sales during the latest Christmas season. Unfortunately, since many toys or holiday items contain chips, there was a soar in scams involving these products. A new coronavirus variant emerged in the second half of 2021, causing more lockdowns in some parts of the world, and this could delay the recovery of the chip shortage.

Analysts believe that Western governments must invest in chip manufacturing. The investments must include exploration, mining, and processing minerals to diversify supply. Consumers and enterprises should consider holding off on upgrades of their computer equipment and cars while the shortage ends.

Manufacturers are also considering replacing components with similar chips with additional quality tests. Another alternative is to acquire second-hand computer equipment and cars when necessary.

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