The US economy is supposed to restart, but something keeps getting stuck in the gears. Although isolated in a handful of sectors, product shortages, from wood to gasoline, are increasingly hard to miss. Many of these shortages – cars, phones, game consoles, even automated dog washing booths (!) – have the same thing in common: They need semiconductor chips, themselves scarce. Big tech companies believe the problem will persist the next years; PlayStation 5s could be rare until 2022. What made a single supply chain shortage rule them all and how long will it last? Some answers and some bad news.
What are Semiconductors?
Semiconductors are the chips that handle functions such as data storage, graphics rendering, and the power consumption of electrical devices. They are usually made of silicon wafers and are ubiquitous in today’s digital world. Goldman Sachs reports that 169 industries in the United States have products with integrated semiconductors, and that there will be an average 20 percent component shortfall for affected companies. There are many varieties of crisps, and in the past shortages were usually limited to one type. What makes the current shortage so difficult to manage is that it affects many different types and brands. everything at once.
Why is there a shortage?
As with everything that seems nowadays, the problem is Coronavirus pandemic. Over the past year, the demand for laptops, monitors, smartphones, video game consoles and other devices has increased as large segments of the population have had to work and play at home. In addition, Chinese technology companies have accumulated semiconductors in anticipation of American sanctions restrict the country’s access to chip technology. Several large factories also had to stop production due to fires, blizzards and droughts, and the renewed interest in Bitcoin precipitated the cryptocurrency mining equipment, which, yes, requires semiconductors.
So will it be harder to get electronics?
Yes. Beyond the PlayStation 5s, Apple said difficulties in sourcing chips are hampering production of iPads and Macs, which could cost the company dearly. $ 3-4 billion sales for this quarter. CEO Tim Cook said Apple has more problems finding old models of chips that go into on-screen displays rather than newer, high-tech models. These difficulties have apparently lengthened delivery quote for the company’s 2021 12.9-inch iPad Pro. Samsung also announced in March that it could skip the launch of the new Galaxy Note smartphone, and it seems that Google is limiting the distribution of its next Pixel 5a to only United States and Japan.
It’s not just these high-tech products that are feeling the pressure. Device manufacturers in Asia, the shortage affects the chips that washing machines use to weigh clothes and toasters use to warm bread. The Washington Post reported last week, a major supplier of automatic dog washing booths in parks and the US military cannot acquire the usual chips its products depend on to handle transactions and dispense soap and water; it is now evaluating the possibility of ordering a replacement chip which will ultimately increase costs and delay deliveries. Machine maker Caterpillar also said last month that he anticipates chip problems later in the year as demand for construction and mining equipment increases.
The automotive industry is one of the sectors hardest hit by the shortage. Request for cars dropped sharply at the start of the pandemic, so many automakers decided to cancel their chip orders. Car sales then saw a stronger-than-expected recovery – people are returning to their workplaces, their wallets a little heavier thanks to government stimulus checks – but as automakers tried to reorder the chips needed, semiconductor manufacturers already had their hands full. peak demand for other electronic products. In addition, a fire in March at the Japanese plant of Renesas Semiconductor Manufacturing Co. Ltd. provides two thirds of all the chips used by automakers, has seriously disrupted global supply chains. As a result, car manufacturers had to suspend their activities. Volkswagen has suspended production at its factories in Mexico, Germany and Slovakia. Mercedes-Benz is suspending operations at two factories in Germany and Ford is also cutting production in the country. These production problems now contribute to a soaring prices for new cars, which often have thousands of chips. Some manufacturers report price increases of 10 to 20 percent for certain cars. It is so bad that demand is also causing a shortage of used cars.
But these companies have a plan to solve this problem, right?
Frames at Intel, the world’s largest semiconductor company, said it will take around two years for the industry to build more chip factories to meet demand. Intel itself is spending $ 20 billion to build two new factories in Arizona. Taiwan Semiconductor Manufacturing Co., another major chip maker, invests $ 100 billion over the next three years to increase capacity, including building a plant in Arizona as well. President Joe Biden’s infrastructure package also includes $ 50 billion in subsidies for semiconductor factories, a provision that has received bipartisan support. The president also signed a decree in February for a 100-day semiconductor supply chain review. Startups and venture capitalists are also trying to tackle the problem by trying to find new and efficient ways to develop chips. faster, although it is not known if and when these efforts will bear fruit.
There are also a number of short-term strategies these manufacturers are pursuing to alleviate some of the more pressing issues resulting from the shortage. Intel opens its factory network companies that design car chips to deliver more semiconductors to the automotive industry in six to nine months. Electronics distributors check with companies that may have additional chips hang out, and manufacturers have tried to find ways improve slightly production rates in existing factories by increasing the speed at which chips move on the line and delaying maintenance.
It’s very clarifying but here is my real question: when does my PlayStation arrive?
I can not help you.
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