Chips are down: why there’s a semiconductor shortage

Paris – A shortage of semiconductors has sent shockwaves through the global economy, squeezing supplies of everything from cars to headphones.

The dearth of chips has exposed the modern world’s reliance on these miniscule components, the basic building blocks of computers which allow electronic devices to process data.

The start of the Covid crisis in early 2020 prompted a global spending spree on electronic items – from extra monitors as people rushed to set up home offices, to televisions and games consoles for beating lockdown boredom.

Temporary factory closures due to the pandemic also put pressure on supplies.

And as plants reopened, electronic goods producers continued to place orders – creating an ever-increasing backlog for the chips, which can be just a fraction of a millimetre long.

The pandemic isn’t the only factor. A storm briefly halted production at several plants in Texas in February, and a fire ripped through a Japanese factory in March.

US-China tensions are also part of the story. Last August, the US banned foreign companies whose chips use American technology from selling to Chinese tech giant Huawei, over espionage allegations.

Huawei began stockpiling semiconductors ahead of the sanctions coming into effect, and other companies followed their lead, further straining supplies.

The car industry has been the most visible victim so far, with many brands forced to slow their output in recent months.

As automakers slashed production early in the pandemic, their chip suppliers turned to clients from other sectors – namely the makers of electronic goods in high demand due to the pandemic.

That has left car brands, from Volkswagen to Volvo, scrambling to get hold of semiconductors now that sales are revving up again.

Smartphone makers had been relatively protected so far as they had existing stockpiles of chips, but they too are starting to suffer.

Apple chief executive Tim Cook warned last week that the shortages are set to hit the production of iPhones and iPads. Smaller phone-makers are likely to be worse affected, analysts say.

Games consoles like the PlayStation 5 and Xbox Series X have also been in short supply.

Meanwhile. governments are hurrying to boost their chip-making capacities. –