Why the global shortage of chips will not stop soon

News of the global chip shortage this year was so far-reaching that it became a meme. “I’m sorry I forgot to do the dishes, there’s a global shortage of chips.” But, as in many online jokes, there are grains of truth. The semiconductor chip crisis is real and has had a serious impact on our lives. Cars are more expensive and harder to make. Computer manufacturers are rushing to keep up with the insatiable consumer demand for telecommuting and school devices. And countless products have been delayed, and release dates have shifted like dominoes during 2021 and beyond.

While this is a problem that affects almost everyone, the lack of a chip is especially painful for players. A year after the introduction of the PlayStation 5, it is still virtually impossible to order it. (At least, not without paying too high a fee or tracking bots on stocks like machines.) And PC players eager to upgrade their GPUs, already accustomed to less and less hardware inventory and dizzying prices, will have to live with their old video cards a little longer.

As Glenn O’Donnell of Forrester Analytics tells Engadget, the problem is mostly a simple supply and demand problem. There are several reasons for this: carmakers cut hardware orders at the start of the pandemic, assuming consumers will not be interested in buying new vehicles. It turned out to be the exact opposite – huge demand significantly raised the prices of used cars. Chip manufacturers have also been forced to keep pace with growing demand for PCs, game consoles and a wide range of gadgets, while also dealing with production slowdowns due to the closure of COVID and other precautions.

Aaron Souppouris / Engadget

“I’d like to say that things have improved, but they’ve actually gotten a little worse, and I’m not surprised,” O’Donnell said in a recent interview with Engadget. In April, he claimed that the global shortage of chips would continue during 2022 and 2023. Now he is even more convinced that we will not see any greater relief until then. Although future chip factories from Intel, TSMC and Samsung could increase inventory, it will still be at least two years from the time these companies break through to the start of operations. Intel began construction of its two chip factories in Arizona in September and does not expect to be operational until 2024.

In principle, get used to the lack of chips, because we will suffer for a while. In an interview with Nikkei last week, Intel CEO Pat Gelsinger also confirmed that he expects the situation to last until 2023. “COVID disrupted supply chains, causing it to become negative,” he said during a press event in Malaysia, where the company is investing $ 7.1 billion in production lines and packaging lines. “Demand has exploded at 20 percent over the previous year, and disrupted supply chains have created a very large gap … and that exploding demand has survived.”

NVIDIA CEO Jensen Huang reiterated that opinion in a recent statement Yahoo Finance interview, saying he doesn’t think there are “magic bullets” when it comes to dealing with the supply chain. Huang also noted that NVIDIA’s own group of suppliers has multiple sources and is diverse, so the lack should not dramatically affect new product development. But NVIDIA also struggled to keep up with player demands even before the pandemic. Scalpers and cryptocurrencies typically bought out all available inventory, leaving the average consumer with a limited amount of inventory from stores and resellers.

Although Huang expects production to increase again in 2023, he also believes the pandemic incentive to buy more computers and gaming hardware will remain there. “I think these are permanent conditions and we will see that new computers are made for some time to come,” he told Yahoo. “People are building home offices and you could see all the implications.”

There is a glimmer of hope in the U.S. that the Innovation and Competition Act (USICA), which includes $ 52 billion in funding for the CHIPs for America Act, could spur greater semiconductor production. But after the Senate passed earlier this year, the law stalled in the House of Representatives, where Republican members said they would block USICA. The bill also includes $ 190 billion to improve U.S. semiconductor research and development, all in hopes of becoming more competitive with China, which has dramatically increased its chip production over the past decade.

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Naveen Kumar

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