The dependency on Semiconductors and it’s effect on global Chip shortage

The dependency on electronics in today’s day and age has resulted in a huge dependency on semiconductors. This dependency has led to a shortage of capacity at which chip makers are able to operate. There is a major issue prevailing in the technology space that is causing a lot of problems for technology manufacturing companies, there aren’t enough microchips for our appliances. Due to a number of factors, there aren’t enough chips for the product manufacturers to work at full capacity. These chips are not only causing an issue in the PC market but have had a ripple effect into other industries such as gaming consoles, mobiles, IoT devices and the automobile industry as well. There are a number of car manufacturers that have had to stop their car production as they did not have enough supply of these semiconductors to add to their vehicle and as we know with the advancement of vehicle technology this generation of cars are majorly dependent on the electronics unlike the last generation of vehicles.

The COVID-19 pandemic has played a major role in the semiconductor shortage along with the existing trade war between US and China. The ongoing trade war with China has resulted in a huge number of American companies losing their biggest chip supplier as china has always been known for the amount of electronics it produces. This Chinese trade war has invited huge losses in the number of active chip makers and was further set back by the pandemic reducing the capacity at which chips could be manufactured.

Another major application that is hugely dependent on semiconductors is cryptocurrency. The process of mining digital coins like bitcoin requires a lot of computing power as the process has reached a high level of complexity. This process of mining has resulted in the global GPU shortage, GPU being the graphical processing unit also known as graphic card. There are a huge number of GPUs that end up in the hands of crypto miners which causes a shortage of supply that leads to GPUs being sold at 3-4 times their MSRP.

The automobile industry is the most unexpected industry to be drastically affected by this shortage. The amount of chips being produced for car manufacturers have just not been enough to keep up with the technological advancement of these vehicles and the introduction of semi- autonomous vehicles. However, it is believed that this production shortage is mainly due to the pandemic and will be back at full capacity in the coming year.

This major shortage of chips has resulted in governments realising the importance of manufacturing rather than outsourcing and have thus allotted a major portion of their annual budget to combat this shortage. Primarily countries like USA and Korea are providing huge benefits to chip manufacturers to increase their production capacity within the country and reduce their dependence on a single manufacturer either local or abroad.

Semiconductors are showing a similar trend to what oil did in the 20th century where the country with the best infrastructure controlled the trade.

The gaming industry has come up with an interesting practice regarding this shortage – cloud gaming. This mainly involves the user paying a monthly subscription to companies to use their computers/servers to game on. This is yet to be implemented at a large scale as it would require these servers to be present in every location at an interval of certain distances due to the latency but it is a step towards the right direction for many as their initial investment is drastically reduced.

There is no particular short-term solution to this issue and the only thing that can help bring things back to normal is time. The process of making manufacturing plants to keep up with demand will take time and thus the only thing a user can do is reuse and recycle their older components/appliances and wait for things to go back to normal. There are a few solutions in the pipeline to reduce the dependency on semiconductors for their processing needs but these will take quite a few years to implement as they would be replacing the current system processes entirely.

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