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27 Oct 2021

The global microchip shortage that you didn't know about

Oliver
By Oliver
  • Read time: 1 minute

With the country seemingly to be fully re-open after lockdown you may have noticed certain items are harder to find in stores or have much longer waiting times to come back into stock.

So what is happening?

You may be sat there thinking "why is my car delayed?" or "why can't I get the latest Xbox or Playstation?". This is because of a global shortage of ‘semiconductor chips’ which are used in hundreds of our day-to-day items from electric toothbrushes to the latest cars. Even before the global COVID pandemic the demand for these tiny chips was much higher than the supply.

Supply chains around the world are being affected as manufacturers struggle to obtain enough semiconductor chips for their electronic products. Many prospective vehicle owners are being told that their new cars are being delayed with no certainty on when they can be delivered. Some vehicle manufacturers have already announced that they are reducing supply as a result, Nissan recently announced that it will be producing 500,000 less vehicles due to the shortage. Many EV charger manufacturers are also being hit by the shortage as the crisis shows no immediate signs of clearing.

microchip close up

What are semiconductor chips and why the shortage?

To put it simply, semiconductor chips are used to control the electrical current in an electronic device. They are present in almost every daily appliance we use. Some economists have begun calling them “the new oil” due to their importance to daily modern life.

The shortage itself was mainly caused by the global COVID outbreak; many companies cancelled their orders for chips assuming that the economy was about to take a downturn. Semiconductor chip manufacturing plants also closed during this time. However, the issue wasn’t just on the manufacturing side as major ports around the world also shut down leaving hundreds of container ships unable to dock, creating a bottleneck in supply.

When will it be resolved?

Experts within the chip industry are predicting that the shortage will easily roll over into 2022 and could well last for a further two years before normality is restored. Prices of affected items are expected to increase in the short term whilst demand remains high. It may become more obvious in time as companies such as Apple and Samsung who began stockpiling chips early on begin to run out and also become affected by the shortage.

Oliver

Written by Oliver

Oliver is a Content Specialist for 50five UK