Global Chip Shortage How Did it Happen

The Corona shut down production lines as demand for computers, tablets and monitors soared. Now technology companies are trying to stock up on as many chips as possible, but manufacturers are having a hard time keeping up. The result: a shortage of products (e.g. PlayStation 5) and paralysis of the automotive industry. How will it end? Biden is expected to intervene and Marvel Israel CEO reassures: “I believe that in 2021 we will return to sanity”

The world is in a computer chip crisis – and it is getting worse: companies like Apple, Qualcomm, Sony and AMD are reporting shortages, which is preventing them from meeting supply targets. Service stations for iPhones have a problem of spare parts availability. Anyone looking to buy a gaming console like Sony’s PlayStation 5 may find that it’s out of stock. The global automotive industry has shut down car production lines due to a shortage of chips. There was a panic, reminiscent of the race to get toilet paper in the first closure: all companies order full as much as they can get and far beyond their real needs, just for fear of getting stuck without being able to meet demand.

The chip industry, the semiconductor industry by its professional name, consists of three parts: At the forefront are the companies that sell us electronic devices, Apple said. Behind them are the companies that develop the chips that are installed in the devices, Qualcomm said. Behind these are the companies that make the chips for them, TSMC said. Once upon a time, companies like Qualcomm manufactured the chips themselves in factories called Fabs. They then outsourced production to chipmakers while becoming Fabless. But when there is a problem with the supply of the chip-making companies, all this huge industry above it, gets hurt.

Apple is having a hard time keeping up with demand for the iPhone 12

This crisis has caught the chip industry in the middle of a huge leap. A series of mergers have created new giant companies, including Anvidia and AMD. Apple has entered into independent chip development. Samsung is rapidly increasing its chip manufacturing areas. Intel is expanding part of its outsourced chip production. Significant internet companies like the American Amazon and Google and the Chinese Baidu are also developing their own chips and Microsoft is also working on developing its own chip. And all this could have been a reason to party if it had not turned out, that the required chips could not be provided.
In a sense, companies in the Western world are today paying the price of enslavement to growth, which has caused them to shut down production lines and outsource chip production to two or three companies in Southeast Asia, led by TSMC from Taiwan and Samsung in South Korea. TSMC is more or less the pub of the world. Taiwan is educated to invest billions of dollars in supporting this industry, $ 28 billion in 2021 alone, while constantly improving its chip manufacturing technologies and keeping prices cheap, making it the only alternative for some customers.

What actually happened? The corona. The plague left many workers at home and damaged production lines. On the other hand it has increased the demand for computers, monitors, routers, everything that is chip based. In recent months, the car industry has decided that the end of the epidemic is on the horizon and has sought to return to full-scale production, which has been reflected in huge orders for chips. All of this has also led to an increase in the price of chips, according to analysts’ estimates of about 15% in recent months.

One would think that some of the demand would be directed to other countries, for example China, which is steadily strengthening its chip industry, but the crisis in trade relations with China makes the task almost impossible. TSMC on the other hand has its own priorities, and they mainly include the big companies, Apple for example. This created a parade of companies and governments, which put pressure on the Taiwanese government in an attempt to get some of the chips that prevent car production for example.

Now that there is a huge demand that cannot be met, it becomes clear how unstable this industry is. Taiwan is under constant influence and threat from the Chinese giant. The deterioration of the political situation could lead to the shutdown of Taiwanese factories and halt the world. Without chips no cars, no computer servers, no fast communication, no advanced industry. The concentration of production in Taiwan is, above all, a geopolitical problem.

It could be that the person who will change the picture is the Biden administration. When it comes to the automotive industry that America is so proud of, and alongside computer companies that are a key pillar in the American economy and facing the problematic geopolitical balance sheet, this is probably a national problem for the US administration. Now the American chip industry is making a pilgrimage to Washington to speed up decision-making. 21 company executives have signed a letter to President Biden, including CEOs of Intel, Qualcomm, AMD, Anvidia, Broadcom, IBM, Marvel and others, warning that US manufacturing plants have fallen to 12 percent from the global market compared to 37 percent in 1990. They read White House spokeswoman said President Biden was expected to sign a presidential decree launching a bailout plan for the U.S. chip industry and signaling U.S. seriousness in maintaining US leadership. Her status in the field.

The Israeli company DSP Group develops chips for many electronic consumer products. The company’s CEO, Ofer Elyakim, says that coming out of the crisis will be painful: “It’s going to be interesting. The world after, especially with the snowball now formed, is going to hurt and be heavy. States will need to require the establishment of local manufacturing plants. I agree that there is a reasonable chance that if there is a fatal economic damage in 2021 in all kinds of industries such as automotive and communications, it will probably lead to significant steps. ”

The international Marvel company is also developing chips at its branch in Yokneam, one of the most prominent in the industry in Israel. Guy Azrad, CEO of Marvel Israel, believes that 2021 will be the year in which the world emerges from the chip crisis: “We are simply setting up more factories, and at some point the market will calm down. After all, global consumption has not changed except for the jump that has taken place. The corona put everyone under pressure, there was a kind of hysteria at first, but now we will start to see more sanity in the world. I believe that in 2021 we will return to sanity. ”



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