The Chip Shortage Keeps Getting Worse: let’s get the chips back home

Toyota is to slash worldwide vehicle production by 40%, Samsung has warned of a possible skipping Galaxy Note release this year, and the Biden administration intends to support the chip industry with America’s Chip Act. It seems that the chip production crisis is here to stay.

Why is the chip shortage getting worse?

American companies were world leaders in designing cutting-edge chips for a variety of innovations: from smartphones to ​​search engines. These advanced microcircuits are based on perfectly etched silicon. But very few such semiconductors are actually produced in America.

According to statistics, in 2019, the United States produced only 12% of the chips sold worldwide, down from 37% in 1990. And according to an April report from the Semiconductor Industry Association and the Boston Consulting Group, all chips made with the most advanced methods are made in Asia — 92% in Taiwan, the remaining 8% in South Korea.

And if for many years this was not a problem, but with the advent of Covid-19, the situation has changed. Due to the pandemic, supply disruptions, increased demand for technology, and competition from China are forcing American companies not only to design but also to produce microcircuits at home.

The results of the shortage of microcircuits in numbers:

• Gaming consoles
  
  – Sony says it is having a hard time increasing production of PS5 consoles.

• Smartphones
  
• – Apple expects the impact of the deficit to intensify and spread to iPhone production.
  – Samsung recently warned it could skip the launch of its popular Galaxy Note phone this year.

• Cars
  
  – Tesla says it is using alternative chips and is rewriting software.
  – Toyota will cut global car production by 40% in September due to a global microchip shortage.
  – Ford halted production in Kentucky in December 2020, and in January it ordered a month-long hiatus at its German plant.
  – Renault predicts that its car production could decline by about 100,000 this year.
  – Audi, Subaru’s Gunma factory in Japan, General Motors, Nissan, Daimler and BMW have already cut production in the face of global chip shortages.

Why Can’t We Just Make More?

The short answer is that it is very difficult.

And while there are Intel and a few other big chip companies in the US, the increase in shipments cannot come quickly. And the reasons are as follows:

• New giant semiconductor factories have to be built, and this is a complex, laborious and very expensive process. 
  
• After all, the ultimate goal of manufacturing is to turn silicon wafers into a network of billions of tiny switches called transistors that form the backbone of the circuit. That’s why, in addition to the enterprise itself, you need equipment – several million dollars worth of machines to melt tin and lasers. 
  

It will take years, billions of dollars, and a tough grip for professionals. After all, if your production experiences lag slightly more than the competitors, you can lose everything.

What’s next?

The Biden administration has signaled an intent to bolster the chip industry. The CHIPS for America Act, which would fund the semiconductor industry to the tune of $52 billion over five years, was passed as part of the National Defense Authorization Act.

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