Inside the global chip crisis!
Who’s hurting, and who’s winning
The COVID-19 pandemic has affected almost every aspect of our lives, not to mention the industries we depend on both professionally and personally. One that might not immediately spring to mind for many people is the production of electronic devices, and, in particular, the chips that sit at the heart (or maybe the brain…) of such products. It should though. Semiconductors – including memory chips, microprocessors, and integrated chips – have been in short supply in the tech industry, and all those that rely on them are in the midst of a genuine crisis. While Apple is better placed than many to ride out the storm, nobody is quite sure at this point when it will end.
What’s the problem?
Like so many workplaces around the world, the factories that produce these vital components had to close as the COVID-19 pandemic escalated. This inevitably led to significant production delays. When they were able to get back operating, the pandemic had caused such a spike in demand for things like new computers, smartphones and smart home devices that supply could not match demand. Car makers, who slowed down orders during the pandemic, also suddenly found themselves in need of more of these components than before, further adding to demand. As a result, there has been a global shortage of semiconductors, and manufacturers are still trying to catch up.
“Chips are everything,” Mirabaud’s media and tech analyst Neil Campling told The Guardian in March. “There is a perfect storm of supply and demand factors going on here. But basically, there is a new level of demand that can’t be kept
up with; everyone is in crisis and it is getting worse.”
The constraints caused by the pandemic were in no small part exacerbated by the fact that there are relatively few companies making chips, causing major bottlenecks. Taiwan Semiconductor Manufacturing Company (TSMC) is the market leader and crucial across the supply chain, with Samsung in second. If they slow down, everything slows down.
Alongside the pandemic, TSMC faced pressure from the Taiwanese government after the island nation suffered a drought. In March, the company was told to cut the amount of water it uses in production by a total of 18%. (TSMC’s manufacturing process requires a lot of water – 156,000 tons of water a day, in fact. It was reportedly prepared to use trucks to bring in supplies of water in order to keep operating at normal capacity).
The effect on Apple
It comes as no surprise that even the mighty Apple has been affected. After all, the company requires more chips for its products than anyone else, followed by rival Samsung. Many Apple products still contain Intel chips, and even though Apple now designs chips in the iPhone, iPad, and some Macs, these still require third-party manufacturing. In total, around 25% of all TSMC’s orders come from Apple – the company is the sole provider of the A14 chips in the iPhone 12 and has been the exclusive provider of Apple mobile chips since 2015.
Production of GPUs, the graphics chips in devices, has been affected in the same way the manufacture of other chips has. This is thought to be at least part of the reason why Apple opted to stagger the release of the iPhone 12 range, launching first the entry level model and Pro, before the mini and Pro Max arrived a few weeks down the line. In general, though, iPhone production has not yet been limited by chip supply shortage, according to Nikkei Asia. However, chip shortages did reportedly delay components being mounted onto printed circuit boards ahead of final assembly of MacBooks.
Furthermore, a proportion of iPad assembly was also postponed as displays and display components were in short supply, with Apple ultimately opting to hold back some component orders for both these devices, waiting until the second half of 2021 instead. Overall, it is understood that Apple’s supply chain doesn’t have much wiggle room, but its customers are not yet seeing the consequences of the global chip shortage.
If Apple is trying to avoid maxing out its chip supplies, that is a plausible explanation as to why its events over the last year have been a little later than close Apple watchers might have expected. It may also explain why the iMac Pro was discontinued in March, but that’s likely more to do with a new model release.
What about rivals?
If things look tight for Apple, that’s nothing compared to the potential problems the global chip shortage has caused Samsung. “There’s a serious imbalance in supply and demand of chips in the IT sector globally,” co-chief executive Koh Dong-Jin warned his shareholders. It is even possible that Samsung will
It comes as no surprise that even the mighty Apple has been affected. After all, the company requires more chips for its products than anyone else.