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Explainer: Why is there a global tip shortage, and why do you need to worry?

From delayed car deliveries to shortages of consumer electronics to expensive smartphones, businesses and consumers around the world are at the mercy of an unprecedented shortage of semiconductor microchips.

The shortage is due to the confluence of factors that automakers that closed their factories during last year’s COVID-19 pandemic compete with the vast consumer electronics industry for chip supplies.

During the pandemic, consumers stocked up on laptops, game consoles, and other electronic products, and inventory was tight. They also bought more cars than industry insiders expected last spring, further squeezing supply.

Sanctions on Chinese tech companies have exacerbated the crisis. Originally concentrated in the automobile industry, there is now a growing shortage of various home appliances such as smartphones, refrigerators and microwaves.

In all companies that use chips to reinforce their inventories for production panic buying, shortages are squeezing capacity, increasing costs even for the cheapest components of almost every microchip, and increasing prices for final products. I will.

car

Cars are becoming more and more chip-dependent-for everything from computer management of engines to better ones Fuel economy For driving support functions such as braking in an emergency.

The crisis has forced many to cut production of unprofitable vehicles. General Motors Co., Ltd. And Ford Motor Co., Ltd. It is one of the leading automakers that has said it will reduce production and join other automakers, including: Volkswagen AG, Subaru Corp, Toyota Motor And Nissan Motor..

According to data firm IHS Markit, a shortage of automotive semiconductor chips could affect approximately 1.3 million light commercial vehicle production worldwide in the first quarter.

IHS said a fire at a Japanese chip manufacturing plant owned by Renesas Electronics, which accounts for 30% of the global market for microcontroller units used in automobiles, exacerbated the situation.

The harsh winter weather in Texas also forced Samsung Electronics Co Ltd, NXP Semiconductors, and Infineon to temporarily close their factories. Infineon and NXP are major automotive chip suppliers, and analysts expect to add to the shortage of sectors suffering from turmoil.

Asian squeeze

Underlying the pressure is a lack of investment in 8-inch chip manufacturing plants, mainly owned by Asian companies. In short, demand for 5G phones and laptops recovered faster than expected, and we struggled to increase production.

Qualcomm, which has chips on Samsung mobile phones, is one of the leading chip makers struggling to keep up with demand. Foxconn, Apple Inc’s leading supplier, also warned of a chip shortage affecting the supply chain to its clients.

Most of the chip production is currently done in Asia, with major consignment manufacturers such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and Samsung handling the production of hundreds of different chip companies. US semiconductor companies make up 47% of global chip sales, but only 12% of global manufacturing is done in the United States.

What is going on about it?

Building a wafer manufacturing plant can cost tens of billions of dollars, and expanding its capabilities can take up to a year to test and certify complex tools.

US President Joe Biden has sought $ 37 billion in funding for a law to supercharge domestic chip manufacturing.

Currently, four new factories are planned in the country. Two are Intel Corp, one is TSMC in Arizona, and the other is Samsung in Texas.

China has also provided a myriad of grants to the chip industry as it seeks to reduce its reliance on Western technology.

(Report by Munsif Vengattil and Eva Mathews in Bangalore; edited by Bernard Orr)



Explainer: Why is there a global tip shortage, and why do you need to worry?

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