Electronic Parts Sectors being affected by Semiconductor Chip Shortage
The electronic parts supply experts from oemsecrets.com believe that the shortage of semiconductors and chips in general is a crisis that will be a dark cloud for at least 2 more years with more evidence of idling plants in the car industry, flagship products being pushed for later dates, consumers waiting to products with lead times creeping up north of 15 weeks.
Although the industry has recorded a growth of 11% in 2020, and another 12.5% increase this year to the tune of $0.5 Trillion, the auto industry is geared towards a loss of $60 Billion in sales because of the lack of semiconductor chips used in cars for majority of the control functions. What causing this shortage and why now?
What are the key factors causing the electronic parts semiconductors shortage?
Although some experts are linking this to a few reasons we have identified 3 key reasons:
- Lifestyle change
Although covid-19 isn’t the direct cause of supply chain malfunction, it has become the number one cause of capacity restrain as semiconductors companies cannot increase their production due to covid-19 restriction due to employee’s safety. Due to the nature of the job, manufacturing plants workers must be onsite and as a result beyond creating a culture of safety, institutions have had to create proximity rules to prevent any potential spread of covid in case anyone comes into the plant without knowing they are shedding the virus.
Anyway, to say the least, reduced capacity in semiconductor plants has resulted to a big knock on effect especially in auto industry, LED lighting and consumer electronic like wearable tracking devices for pets and humans and other 169 industries identified by Goldman Sach’s latest research.
Capacity under current government regulations around covid will not help improve the situation because even without any restriction, increasing capacity to the levels the companies need could take 2 years to build new factories, add competent staff and increase shipment capabilities.
Some might say America and China’s recent trade war is to blame for the chip shortage, but is it geopolitical or just an ideology dimension? Whatever, the deal is, we can clearly see that tension between America and China is influencing the flow of parts especially since China is one of the biggest producers or special raw materials for semiconductors. The companies that use these semiconductors are mainly American and with the introduction of tariff on Chinas products and exclusion of Chinese companies like Huawei from big USA contracts and success of tech companies like Tiktok. This is clearly a case of two great powers competing or what the west calls a new cold war.
A few key elements we think might be the root cause of this geopolitical strain affecting the supply market is military strength with both classed as superpowers, economic decoupling and both countries have become totally interdependent, technology (tiktok and Huawei 5G), information competitions and who controls international orders. China is certainly doing what it wants e.g., increasing violating maritime laws, human rights, and because of this continuous violation of international orders, the USA is trying to flex its muscles to ensure it remains the king of international orders which China is clearly not abiding by.
Increase in demand for consumer devices has been the biggest driving factor to electronic parts shortage. We have seen this by the surge of sales of products like video games consoles (Xbox from Microsoft and Sony PlayStation 5). Working from home has increased the demand for laptops and personal computers, because of gym closures we have seen and increase in health monitoring devices and wearable go up causing a shift in supply and demand for chips mainly for consumer good too as people increasing start using home automation technologies to interconnect their household appliance to the internet for entertainment, heating & energy management, and security just to mention a few. According to rangersdog.com demand for pet tech related products has increase over the past year with a lot of people adopting pets which they would then buy wearable devices to track their locations whilst working at home without necessarily physically seeing them from their home office. This is just one of the 169 industries that is being affected and causing demand for semiconductors to increase beyond what supply can cope with.
What are semiconductors?
Semiconductors are usually categorised into 3 including, integrated circuits(ICs), Discrete and Wireless modules and adaptors. Semiconductors are usually made up of substances that can either be conductors or insulators. Common parts you might know include diodes, transistors, thyristors, controllers, switches & multiplexers, sensors, amplifiers etc. Semiconductors electronic components are made from pure elements like silicon and special rare earth metals.
Semiconductors are the often classed simply as the brains of modern electronics with use in every industry from communication, military, transportation, computing, toys, healthcare, energy industry just to name a few.
Although the shortage seems to have hit the automotive industry the worst, we have seen companies like Toyota not feeling the strain as other car manufacturers simply because they have worked on enhancing their supply chains after the 2011 tsunami disaster. The chip shortage is certainly there in more than 169 industries and this we have seen has been caused mainly by 3 main factors some of which are beyond manufacturers controls.
Hopefully, the shortage disappears soon, and covid disappears too and the decrease in prices which has started trickling down the consumers.
Article written by: https://www.grandmax.net/ editor Will Smith