Semiconductor Shortage

By : Neha Dhyani

Updated : May 19, 2022, 7:00

The COVID-19 epidemic forced several enterprises to close, leading to reduced output and disrupted supply lines. In the digital world, wherein silicon chips are at the core of almost everything digital, raw material scarcity has become an obstacle to the implementation of innovative products. Read the reason behind Semiconductor Shortage.

During the lockdowns, several critical personnel were ordered to stay at home, which resulted in chip fabrication being inaccessible for several weeks. By the time the lockdown was released and the globe accepted the new standard, excess supply for business and consumer electronics had caused ripples across the supply chain.

Reason Behind Semiconductor Shortage

Even in the midst of tremendous need, Chip Semiconductor Shortage furnaces are complex and time-consuming to establish, thus production cannot be ramped up quickly. Over the last several months, firms such as Samsung, Intel, and TSMC have all launched new semiconductor production operations, but these chipmakers take years to develop. This may prolong the Semiconductor Shortage by causing these businesses to place additional orders and keep more inventory on hand.

The cost of setting up a semiconductor fabrication operation is high, and there are numerous hazards involved. Earlier, India attempted to set up semiconductor manufacturing operations, but it failed due to the absence of long-term strategy, government subsidies, and poor planning.

Impact of the Semiconductor Shortage

The global response to the Semiconductor Shortage has been swift, with the US Commerce department reviewing information on the semiconductor distribution chain and publishing the findings last month. It discovered that demand for semiconductors was 17 per cent greater in 2020 than in 2019, but customers were not seeing a corresponding increase in supply.

With soaring demand and full utilisation of available production facilities, it is evident that the only long-term clear solution is to reconstruct our household manufacturing capacity. President Biden has postulated $52 billion in aid to revitalise our domestic semiconductor sector, and each day we wait is another day we fall farther and farther behind.

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Semiconductor Shortage - Solution Possibilities

Large industry participants including several chip manufacturers and suppliers, as well as the many impacted industries, have undertaken many initiatives to alleviate the effects of the Semiconductor Shortage to stay competitive and relevant.

Expansion of manufacturing capacity is an obvious answer for many semiconductor producers. Other producers in specific regions choose to stockpile and restrict exports to respond more effectively to market turmoil and political constraints.

Similarly, several manufacturers are investing in boosting efficiencies or expanding the number of semiconductors generated from a silicon chip to expand chip supply by a certain percentage.

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Semiconductor Shortage - Major Disruptions

The most recent worldwide Semiconductor Shortage has caused major disruptions in the semiconductor distribution network, disrupting businesses ranging from automobiles to consumer technology, data centres, LED, and biofuels.

Regardless of the current construct of risk mitigation, industry experts expect that shortfalls will endure beyond 2023. While a strong recovery is unlikely to occur very soon, several semiconductor producers are confident that they will increase manufacturing to meet demand from their automotive customers.

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FAQs on Semiconductor Shortage

Q1. Why is there a Semiconductor Shortage?

The Semiconductor Shortage was caused by a convergence of issues. In contrast to long-standing industrial concerns, such as reduced capability at semiconductor factories, the COVID-19 epidemic presented unique hurdles. For example, as automobile sales fell in early 2020, manufacturers reduced their chip orders.

Q2. Is the Semiconductor Shortage over?

According to analysts, until there is a dramatic decline in consumption, the Semiconductor Shortage will not end soon. Most industry experts predict that the shortfall will last until the second half of the year 2022.

Q3. Why is there a Semiconductor Shortage in 2021?

The COVID-19 outbreak's domino effect is one of several factors that has resulted in the worldwide Semiconductor Shortage. Additional likely factors also include trade conflict between the United States and China, as well as Taiwan's drought that took place in 2021.

Q4. How do you deal with a Semiconductor Shortage?

Some possible solutions to the Semiconductor Shortage involve increasing manufacturing capacity, adapting existing semiconductor technologies, and employing software solutions to harness hardware capabilities.

Q5. Will a Semiconductor Shortage actually impact cars in 2022?

The majority of analysts predict that the Semiconductor Shortage would alleviate by the second half of 2022. By then, prices will start to fall. As a result, repairing your old car must be your first priority.