December 15, 2022

What Caused the Chip Shortage, and is the End in Sight?

What Caused the Chip Shortage, and is the End in Sight?

Covid-19 will go down in history as one of the most devastating pandemics ever. During the pandemic, many companies opted for a work-from-home environment for employees. However, the chip industry was not able to do so. 

With mandatory shutdowns and long isolation periods, more than just the manufacturing of computer chips for vehicles was put on pause. Other industries were able to pick up the slack, but the electronic chip industry is still struggling to catch up, and it’s not just the automotive businesses either. Here is the latest on what we know.

The Chip Shortage Issue at Hand

The chip industry was brought to a standstill at the end of 2019 due to mass isolation and nationwide shutdowns. Analysts believe that the shortage is showing signs of a rebirth, but those efforts are largely being put forth by South Korea, the United States, and Europe. However, these producers are only capable of producing chips on smaller and less efficient silicon wafers, which isn’t exactly on the cutting edge of technology.

The major companies that have been known to create electronic chips are firing back up, but even with them pumping out chips as fast as they can, it may be toward the beginning of the 2nd quarter of 2023 before the new chips are able to make it through production. So, it is looking up, but we still have a few months of an uphill climb.

The Affected Industries

The industry that we have all heard about being hit the hardest is the automotive industry. The automotive industry has struggled to roll out new vehicles due to the shortage, but they only make up for about 10% of the businesses that are in need of computer chips. 

The two major players that are missing out are computer companies, at a demand of 160.2 billion U.S. dollars, followed closely by the wireless industry, at a demand of 126.7 billion U.S. dollars. To put that in perspective, the automotive industry that is in the headlines is only at a comparatively small 39.5 billion U.S. dollars.

Not that a need of almost 40 billion dollars is a small issue, but the problem is much bigger than what has been largely discussed. However, the challenges caused by Covid caused a large portion of the workforce to recreate the office at home, purchasing computers, monitors, and other equipment. 

At the same time, entire school systems switched to virtual learning via laptops and tablets. More time at home means more spending on home entertainment, such as TVs and game consoles. This new need to work, learn, and play from home, along with the 5G rollout and continued growth in cloud computing, quickly drove the demand for chips sky high.

Ask our experts about working around the chip shortage in your industry!