How the Global Chip Shortage is Affecting the Automotive and Tech Industries

If you have tried buying a new car, gaming console, laptop, or smartphone in the last couple of months, you should have noticed delays in deliveries, especially for the flagship models of these devices. Even the PS5 that has been out for over 15 months is still hard to get.

All these delays and supply shortages that are affecting almost every industry, including the automotive, tech, health, and many more, have been caused by the global chip shortage. In an interview with Tech Monitor in June, Linley Gwennap, the principal analyst at tech research company the Linley Group, called this the worst shortage in the last three decades.


How did we get to having a Chip Shortage? The Pandemic.

The chip shortage started in 2020 during the Covid-19 pandemic when demand for electronic devices skyrocketed beyond what most tech companies had anticipated. Since most people were working from home and staying indoors, companies and individuals were buying laptops, smartphones, tablets, and several other gadgets in order to continue with work and communicating with workmates and loved ones.

Remember all these devices use semiconductor chips, such as processors, graphics cards, network cards, etc. So, as the demand for these devices went up, the need for more chips automatically increased. Despite the decline in semiconductor sales in 2018 and 2019, there was a 6.5% increase in sales in 2020.

The leading global chip manufacturers, Samsung and TSMC, have received overwhelming demand beyond the production capacity of their foundries. This has forced them to operate their foundries at full capacity most of the time.


Other Factors Affecting Tech and Auto Industries

Besides the pandemic, other factors that have led to the chip shortage include the massive drought in Taiwan (when TSMC is located), which is the worst they have seen in the last 50 years. Manufacturing chips requires a lot of water, so the foundries of TSMC and several other chip manufacturers in Taiwan have lacked sufficient water to maintain the designed production capacity of their foundries.


Industries that have been affected the most

Every industry that requires some form of a computing device in its products has been affected. However, tech companies that usually have to sell millions of devices every year have been among the most affected. We have seen big tech companies like Apple delivering orders months after they were placed.

The automotive industry has also been significantly affected as well because cars today are more of rolling computers. Almost every component on the car has a chip that controls how that particular component operates. The chips shortage has forced the likes of Tesla to ship cars without USB ports, which got many customers mad because they were not told beforehand.

GM, Ford, and almost every other car manufacturer in the USA has had to postpone deliveries for some of their flagship cars that they announced nearly a year ago. This shortage is expected to go on throughout 2022 and into 2023, with gradual improvements over this period.