March 01, 2022

Understanding global chip shortage and its influence on IT industry


What are these chips?

The chips, often called semiconductors, sometimes called microchips, function as the brains of our electronics. They’re tiny technological marvels, hosting billions of transistors within them, though the size of the chip can vary. (Those transistors are like tiny little gates, allowing electrons to pass through them or not.) Their construction involves multiple steps, days, and experts on hand. For example, IBM’s newest chip packs 50 billion transistors into a two nanometre, fingernail-sized space. These chips are the lifeblood of modern society, but even before the pandemic, demand for them exceeded supply.

Google Tensor Arm based chip ,manufactured at Samsung foundries.

What is the chip shortage?

As the world shut down because of the COVID-19 pandemic, many factories closed with it, making the supplies needed for chip manufacturing unavailable for months. Increased demand for consumer electronics caused shifts that rippled up the supply chain. Orders began to pile up as manufacturers struggled to create enough chips to meet the new levels of demand. A backlog began to grow and grow and grow.

Car companies, like Ford, have to predict the amount of chips they will need to produce their cars and order them in advance from one of the chip manufacturers. As of now, it can take at least half of a year for a chip order to come in, says Penfield. The current demand for chips is so great that manufacturers can’t make enough chips to meet it at this time, meaning consumers will soon be seeing higher prices for less goods.

But the issue wasn’t just with manufacturing. As COVID made its way through Asia, ports shut down, sometimes for months. Some 90 percent of the world’s electronics go through China’s Yantian port, and it was recently closed, leaving hundreds of container ships waiting to dock. Once the ports reopened, bottlenecks emerged because of the build-up of items waiting to be shipped. Many parts of the transportation supply chain don’t have the capacity to handle this build-up, or the labour shortages that have been occurring, plunging the supply chain into further crisis.

TSMC 8 inch fab manufacturing.

There aren’t many chip manufacturing plants in the world, and the few that were running during the pandemic were subject to a series of unlucky weather events that delayed the manufacturing process further. Japan’s Renesas plant, which creates almost one-third of the chips used in cars around the world, was severely damaged by a fire, while winter storms in Texas forced some of America’s only chip plants to halt production. Producing these chips also requires a lot of water, and severe drought in Taiwan has also affected production.

What are the effects of the shortage on IT and other sectors? 

The tech industry is at a crunch point.

Today, millions of products - cars, washing machines, smartphones, and more - rely on computer chips.

And right now, there just aren't enough of them to meet industry demand. As a result, many popular products are in short supply.

It has become almost impossible to buy a PS5 games console. Toyota, Ford and Volvo have had to either slow or temporarily halt production at their factories. Smartphone makers are feeling the pinch too, with Apple warning that the shortage could affect iPhone sales.

Even companies that wouldn't necessarily be associated with computer chips haven't been spared, such as CSSI international, a US firm that makes dog-grooming machines, is feeling the effects.

Some shoppers have already noticed these problems. Sales of used-cars are up, for instance, because new vehicles, often packed with thousands of individual chips, are in short supply.

The auto industry is getting hit hard, with estimates saying US manufacturers will make at least 1.5 to 5 million less cars this year. Ford and General Motors have already limited production. Tesla revised its own software to support alternative chips to maintain its production levels.


The world is highly dependent on computer chips , smallest disruption in the supply chain can cause huge damage and instability in the economy, electronic manufacturing, IT sector, Health, entertainment etc.

                                                                                                    - Pawan.M.Kolachippu

                                                                                                                          2nd BCA

Department of Computer Science

Vivekananda college, Puttur D.K

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