Trade wars, Covid–19 and accelerating digitalization. A perfect storm has caused a global semiconductor shortage affecting almost every industry that needs microchips, including producers of rugged computers.
If you have been trying to order rugged devices lately you might have run into trouble with them being out of stock or having long delivery times. So why is that? The fault is not with the manufacturer. There is a global semiconductor shortage and they are needed to produce the units. In fact, they are needed for most electronics.
Today there is a chip in almost everything. The shortage is the reason why people can charge twice the shelf price for a PS5. It’s also why it’s so hard to get a new laptop right now. The shortage has grown into a big problem in many industries and now even governments are starting to react.
US president Biden and his administration are working on an executive order to address the supply chain problem and avoid future shortages. The question is how much he can control the situation considering that most of the production is located in Asia.
Several factors behind the global semiconductor shortage
Unpleasant events such as trade wars and the pandemic have worked together with more positive influences like faster than expected digitalization to cause the semiconductor shortage. Here are some of the major drivers behind this perfect storm.
The Covid-19 outbreak has played a part but perhaps not only in the way you think. Obviously, the temporary shutdowns of factories have caused a backlog but there is also a huge change in how people work. The work from home trend has created a big demand for consumer electronics like laptops to keep things running smoothly. You also have an increased load on servers which drives chip demand, driven by things such as the gigantic uptick in video conferences. In the words of Google CEO Sundar Pichai:
Covid-19 has accelerated the adoption of digital tools and trends by years.– Sundar Pichai, Google CEO
Companies have also had a hard time gauging how fast the economy will restart and when demand is going to be back. While some have stockpiled others misjudged how fast the rebound would happen. Many car companies belong to the latter category and they are running out.
The majority of semiconductors are produced in Asia, where China is one of the big players. The tensions between China and the US have caused many companies to take action. Huawei has spent a lot of time in the crossfire and to secure production they have stocked up on extra semiconductors. Chinese semiconductor companies have also been the targets of sanctions increasing the global semiconductor shortage. US companies, in particular, have sought to move production or change suppliers to other countries, putting extra stress on the logistics and manufacturing in countries such as Taiwan.
The digitalization of the entire world was already increasing exponentially before the pandemic accelerated it further. Today almost everything has a chip in it. The amount of chips in cars has basically exploded during the last 10 years and that is going to continue. Electric vehicles use more semiconductors than regular ones and self-driving cars are going to demand even more. This can be seen now with many manufacturers being hit by the semiconductor shortage and companies such as Ford being forced to shut down production lines.