The Global Semiconductor Shortage: Everything You Need to Know
For the past year or so, you may have noticed that it has become increasingly more difficult to buy a variety of computer components, automotive vehicles, or even refrigerators. The lack of semiconductors worldwide is affecting everything that relies on them. Furthermore, in the pandemic world situation, it does not help that it’s becoming more and more challenging to obtain these products at a reasonable price.
The Pandemic’s Impact
As the pandemic began, companies predicted that the coronavirus would interrupt manufacturing and processing facilities, an example would be Apple lowering their projected revenue for the year. It was reasonable to assume so, as a looming worldwide pandemic is sure to interrupt many logistics. However, people were quick to notice that the coronavirus only briefly halted manufacturing and supply, in all of 2020, companies like NVIDIA have been supplying more GPU’s than ever before. Then why have semiconductor products been so hard to get recently?
The answer lies in the concept of supply and demand, and there has been an astronomical amount of demand in 2020. Think about it like this, when people started to work at home, it’s fair to believe that the old home computer suddenly isn’t good enough to keep up and do work on anymore, so a new one is needed. A few hundred or even thousand people isn’t a big deal, but when you think about the global pandemic forcing a large majority of humanity to work from home, the demand for semiconductor products skyrocket while the normal supply can’t keep up. After all, 2020 was the biggest growth year for the computer market in over 10 years, an almost 21% increase in sales, and 200% for chromebooks.
Another thing to consider are the enterprises like Microsoft and Zoom having to cater to the needs of the online working environment. Think of all the computing power and storage tech giants need to upgrade their data centres and servers to maintain their cloud services like Teams and Zoom. For example, Zoom’s peak daily meeting participants went from ~10 million in December 2019, to over 300 million in April 2020. Considering the similar phenomena happening for other massive cloud service providers like Microsoft and Google, and the worldwide demand for semiconductor products just got bigger.
Almost every single industry that depends on semiconductor products to build their smart devices has been hit hard by the global shortage. Automobile manufacturers have also been affected and have been shutting down their car assembly lines because they can’t get enough computer chips to integrate into their vehicles. As the pandemic began, automotive manufacturers made the prediction that the demand for new cars would drop as the line of reasoning was that people would be less inclined to travel. This was correct, but only partially. Demand indeed dropped, but only briefly and came crashing back, as less people were likely to take public transportation with a pandemic on the loose.
Gamers: Having trouble getting a GPU?
I mentioned earlier that NVIDIA has been supplying more graphics cards than ever before, but it really doesn’t seem that way? After all, how many people do you know that managed to get a shiny new generation graphics card at a reasonable price? Elaborating on the prior reasoning on demand, is that the difficulty of getting a GPU at the present time is a matter of perspective. If you’re wondering why it’s been so tough to get a card, it’s simply that a tremendous amount more people want them as well. Some evidence to support this claim is that Steam, a popular video game distribution service, makes their public concurrent user count available. When the pandemic hit, there were extreme jumps in the amount of people playing games, therefore wanting shiny new hardware like graphics cards. We have seen this trend numerous times like when the second wave of coronavirus cases hit and forced everybody back inside. Match this with the release of the new generation of NVIDIA’s GPU’s - the RTX 3000 series, and the release of the new PlayStation 5, there really shouldn’t be any surprise in the demand for electronics.
Supply & Demand
Okay so if the big problem is that there isn’t enough supply, why not just make more? Herein lies the problem, since tech companies have to predict and pre-book way in advance how many silicon wafers (semiconductors), they have to rely on the only two companies in the world who supply them - Samsung Foundries and TSMC. However, even these two manufacturers can’t simply “make more” due to the aforementioned pre-booking of wafers, and because of the worldwide coronavirus situation, the facilities are already running at full capacity - companies will only receive what they ordered, and not anything more.
Although supply from Samsung Foundries and TSMC are being planned to lessen the effect of the semiconductor shortage, those plans to build new manufacturing facilities won’t be here until late 2023 at the earliest. So until the pandemic loosens its grip on us, it’s going to be a few years before the global semiconductor shortage starts to normalize again.
Conclusion
The global pandemic and the massive semiconductor shortage it brought has impacted almost every industry worldwide, especially electronics and technology. From computer components to cars, in one way or another the chip deficit has definitely affected people across the world. Hopefully in the next few years or even sooner, we’ll be able to feel the pandemic loosen its grip on us and have our technology continue to flourish.
