Chip Shortage Update

Tech giants expect the current chip shortage to last six months. The pandemic, historic weather events, and factory fires among other circumstances have contributed to the massive shortage in the market. Emerging technology advancements including AI, cloud computing, IoT, and 5G are also competing for chips and the demand is causing significant production delays. Dan Ives, Wedbush Securities tech analyst, says “demand is probably 25% higher than anyone would have expected”.

Currently, three-quarters of global manufacturing capacities are in East Asia, states US-based Semiconductor Industry Association. Making the US a global leader in computer chips is “a top and immediate priority” according to US President, Joe Biden.

At the onset of the pandemic, “many companies cut their orders for chips, thinking demand would fall, which led suppliers to reduce capacity. However, demand for consumer electronics rose during the pandemic,” says Jonathan Josephs, BBC News Business reporter. He adds, “longer-term solutions are needed to address the concentration of manufacturing of semiconductors.”Furthermore, the shortages “have been exacerbated by companies over ordering components to build up inventory, afraid of being caught short again,” says Paul Triolo of consultancy Eurasia Group.

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