Why the chip shortage continues to drag on… and beyond | GeekComparison

Why the chip shortage continues to drag on... and beyond?

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The semiconductor industry lives on the cutting edge of technological progress. So why can’t it produce enough chips to keep the world moving?

Nearly two years after the pandemic-induced disruptions, a severe shortage of computer chips — the components at the heart of smartphones, laptops and countless other products — continues to affect manufacturers in the global economy.

Automakers have been forced to shut down production in recent months as sales fell because they couldn’t make enough cars. The shortage has impacted industries from game consoles and networking equipment to medical devices. In October, Apple blamed the chip shortage on its financial results, and Intel warned that the drought will likely extend into 2023.

In short, the semiconductor supply chain has been stretched in new ways that are deeply entrenched and difficult to solve. Demand is growing faster than chip makers can respond, especially for basic but widespread components that are subject to the kinds of wide variations in demand that make investments risky.

“It’s just astonishing that it has taken so long for the supply chain to recover after the global economy came to a standstill during Covid,” said Brian Matas, vice president of market research at IC Insights, an analyst firm that tracks the semiconductor industry.

For starters, the sheer size of the demand was surprising. In 2020, when Covid turned normal business upside down, the chip industry was already expecting a revival. Global chip sales fell 12 percent in 2019, according to the Semiconductor Industry Association. But in December 2019, the group forecast global sales would grow 5.9 percent in 2020 and 6.3 percent in 2021.

In fact, the latest figures show that sales increased by 29.7 percent between August 2020 and August 2021. Demand is driven by technologies such as cloud computing and 5G, along with an increasing use of chips in everything from cars to home appliances.

At the same time, US-imposed sanctions on Chinese companies such as Huawei, a leading manufacturer of smartphones and networking equipment, have prompted some Chinese companies to hoard as much supply as possible.

The surge in demand for high-tech products driven by telecommuting, lockdown ennui and a shift to e-commerce has only continued and has taken many by surprise, said David Yoffie, a Harvard Business School professor who previously served on Intel’s board. . †

Chipmakers didn’t realize the magnitude of the lingering demand until about a year ago, Yoffie says, but they can’t turn a dime. New factories for making chips cost billions of dollars and take years to build and equip. “It takes about two years to build a new factory,” notes Yoffie. “And factories have become a lot bigger, a lot more expensive and also a lot more complicated.”

This week, Sony and Taiwan Semiconductor Manufacturing Company, the world’s largest contract maker of chips, said it will invest $7 billion to build a factory that can produce older components, but it won’t start making chips until late 2024. Intel is also investing in several advanced new fabs, but those won’t come online until 2024 either.

Yoffie notes that only one company, ASML of the Netherlands, makes the extreme ultraviolet lithography machines needed to make advanced chips, and ASML can’t produce the machines fast enough to meet demand.

Another problem is that not all chips are created equal.

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