The global chip shortage that has gripped the world over the past few years has its origins in several factors, the first of which is the COVID-19 pandemic. With billions of people working and studying from home, there was an unprecedented demand for PCs, laptops, smartphones, and online activities, leading to increased demand for semiconductors. The pandemic also drove demand for medical devices which required silicon chips.
Other factors include the roll-out of 5G technology, which requires more semiconductor content, and trade tensions between the U.S. and China.
Currently, around 80% of chip manufacturing capacity is in Asia, with the rest mainly in the EU and the U.S. The shortage began with devices fabricated on smaller silicon wafer sizes and older, legacy devices, and later spread to other devices. Beyond shortages in components and devices, there was also a shortfall in the materials needed for manufacturing.
The shortage began to be felt in 2020, and peaked in Q2 2021. Since then, the situation has been slowly returning to normal, but this is causing issues almost everywhere.
The consequences of the shortage have included increased prices for consumers and long wait times. Manufacturers have had to change inventory practices, with many holding higher inventories themselves. Some Original Equipment Manufacturers (OEMs) have co-invested in capacity expansions or partnered with chip companies to have more control over the supply chain.
Some industries are still having issues getting enough chips, for example car production and closer to home for software developers. Certification organisations now have to provide certificates on a secure drive, but the chips for these are in short supply and normal service is not yet in sight. Many organisations require the software it uses to be certified via this process and the shortage may lead to delivery issues for software suppliers.
