Global Semiconductor Chip Shortage

(By Yogita)

We live in a highly automated and technologically advanced world today. Most of the devices
we use at homes, offices, industries, etc use IoT ( Internet of Things) and AI (Artificial
Intelligence). The world seems to be on the brink of the fourth industrial revolution, a
technologically driven period that will fundamentally alter the way we live our lives, work, and
relate with each other.
The recent ‘Global Semiconductor crisis’ made the world realize that we are living in a
semi-conductor world. What led to the disruptions in the supply of the chips or
semiconductors that are used in the production of cars, laptops, or any electronic devices?
How this chip crisis is changing the Geo-political landscape of the world?

Global Semi-Conductor Crisis

In 2021, the automobile industry faced a decline in the production of cars, broadband
providers faced delays in providing Internet routers and play-stations were not found in
stores- all due to a shortage in chips. A chip acts as a brain for any electronic device and
performs many functions like interior lighting, seat control, blind spot, etc.

Causes of the Chip-Shortage

During the Covid pandemic, the demand for commodities like laptops, tablets, smartphones,
air-purifiers, etc, increased beyond levels due to work-from-home culture, online teaching,
and learning. This resulted in the highest sales of laptops in a decade. In early 2020, the
automakers cut their demand for the chips used in cars due to a sharp decline in the sales of
vehicles during lockdowns. But in the second half of 2020, when the demand increased
faster than anticipated, the chip industry had already shifted production lines to meet the
demand for other appliances.
To survive the US sanctions, Chinese smartphone giants like Huawei Technologies Co.
started stockpiling the chips through high imports from around the world. Other countries
followed China’s path to grab some share of Huawei, and China’s imports rose from $320
billion last year to $380 billion in 2020.

Geo-politics of the Semi-Conductor Shortage

The worldwide shortage of the semi-conductor has fostered a reliance on Taiwan, mainly on
the Taiwan Semi-Conductor Manufacturing Company (TSMC), the world’s largest
manufacturer of semiconductor chips. Many countries like Germany, the USA, China, and
Japan are now coming up with plans to create self-reliance in the semiconductor industry as
Taiwan remains under the constant threat of invasion by Beijing. As TSMC is becoming more
and more dominant, the world is coming up with ways to deal with this issue, which doesn’t
seem to be solved at least in the next coming years. With the Russia Ukraine war, the Global
Semi-conductor crisis is getting worse. Russia is one of the largest producers and exporters
of Palladium, a rare metal used in the production of semi-conductor chips. Ukraine, on the
other hand, is the supplier of rare gases used to produce semiconductfor fab lasers.
The first chips that were made in 1958 were dominantly used in nuclear missiles, the world
must now prevent them from becoming an element of 21st-century wars.

References

1. https://www.economist.com/leaders/2021/01/23/the-struggle-over-chips-enters-a-new
-phase
2. https://indianexpress.com/article/explained/why-world-short-computer-chips-matters-
7702682/
3. https://www.bloomberg.com/news/features/2021-01-25/the-world-is-dangerously-dep
endent-on-taiwan-for-semiconductors
4. https://www.weforum.org/agenda/2022/02/semiconductor-chip-shortage-supply-chain
/
5. https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-mea
ns-and-how-to-respond/
6. https://www.thehindu.com/news/international/the-russian-invasion-is-making-the-glob
al-chip-shortage-situation-worse/article65183693.ece