The Global Chip Shortage: What It Is, And How It Happened

By now, you’ve been affected by the global chip shortage directly or indirectly. We’re two plus years into the global chip shortage, and the end is not close. It is affecting most major industries across the globe, due to major strains on supply chains and massive increase in demand. So, what is it? The global chip shortage can be summed up as a lack of available semiconductor chips (including processors, microcontrollers, or memory chips) available to satisfy consumer demand. The most affected industries being the communications industry, consumer electronics industry, and auto industry; but any company needing computer technology of any kind has felt the pinch. Every single piece of technology we use, has at least one computer chip in it. The global pandemic was the catalyst; however, it was propagated by a perfect storm of other misfortunes, and we’ll likely not be through it for another 6 to 18 months. 

There are myriads of reasons the global chip shortage started. First and foremost, the COVID-19 pandemic, which lead to an immediate spike in requests for computer electronics, as work from home kicked in, and consumers suddenly needed to upgrade their computer infrastructure at home. This put an immediate and lasting strain on the supply chain, which has also affected the Business IT side, with wait times for orders taking up to 36 weeks. The pandemic has also wreaked havoc on the fabs that make and design the processors we need. TSMC and Samsung—the only two companies still on the leading-edge node of chip development—were shut down for extended periods of time, as Korea and Taiwan managed the pandemic. Companies using more mature nodes like Intel, SK Hynix, SMIC, Global Foundries, and IBM were also offline for extended periods of time. A spike in demand coupled with an extended halt in supply has created an order backlog that is still being worked on today. 

Unfortunately, the pandemic is not the only cause of the current chip shortage. The US-China trade war has also played a role, with tariffs on semiconductors, and a ban on China’s SMIC semiconductor company adding to the crunch. On top of that, severe drought in Taiwan, severe cold weather in Texas, and even fire in a factory have further compounded the issue. So, whether you’ve been waiting to buy a PS5, are trying to buy a new car, or need to upgrade the printers and Wi-Fi of one of your clients, the global chip shortage isn’t going away any time soon. Demand is continuing to surge, and supply is still not back to pre-pandemic levels. It will be interesting to see how it continues to unfold in the coming months.