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Why Is There a Semiconductor Shortage

Projections show that the global semiconductor market will reach a value of $893.1 billion by 2029.

The demand for semiconductors is increasing. For the last couple of years, however,  there has been a severe shortage. A wide range of industries relies on semiconductors for chips.

This shortage continues to cause problems all over the world. For a rundown on why there’s a semiconductor shortage, keep reading

Why Is There a Semiconductor Shortage?

The chip shortage started in early 2020 during the COVID-19 pandemic. The automotive industry was the first impacted, which had a global effect.

The pandemic caused a significant drop in the demand for cars. Chip manufacturers then shifted their focus away from vehicles and into other areas.

Many more people started working remotely. Semiconductor manufacturers turned towards manufacturing parts for mobile devices and computer equipment. The increased use of communication programs like Zoom resulted in a huge growth in 5G and cloud-based systems.

The automotive industry generally doesn’t use continuity planning. Companies order supplies as and when they’re needed. This shift made automakers less of a priority for chip manufacturers.

Many electronics companies began over-ordering supplies and hoarding them for future use. This meant suppliers couldn’t meet demands, leading to the global semiconductor shortage.

When Will the Semiconductor Shortage End?

It’s difficult to predict when the semiconductor shortage will end. Some organizations think it will be resolved at some point this year, others think next year.

Different suppliers have different levels of quality. Lower-end suppliers will likely increase production to meet the needs of different industries. It’s presented an opportunity for such companies to grow.

For a long time, the world has relied largely on the South Korean and Taiwanese semiconductor industries. Large companies such as Intel and Samsung plan on building more semiconductor plants. This will help end the shortage and is a good business opportunity for these companies.

On top of these efforts by suppliers, the Senate passed a spending bill in June 2021 for $250 billion. $54 billion of this was dedicated to the research and production of semiconductors.  The House of Representatives later stalled this as they plan on writing their own bill.

Impact on the Public

Many people still don’t realize it, but this shortage can have an impact on almost anyone. Smartphone shipments have decreased, making it harder for vendors to meet demands. A similar thing has happened with other mobile devices like laptops and tablets.

The shortage of chips has also led to a rise in counterfeit products. Companies that are struggling to source components may go with less trustworthy suppliers. They can then end up using illegal parts for their products.

Manufacturing Semiconductors

This semiconductor shortage shows that the world may be too reliant on the Asian market. The situation may have been avoided if other countries were able to meet the demands.

Alchemetrics Semiconductor provides leading-edge solutions to semiconductor equipment manufacturers. With our help, you can simplify the supply chain and save time for you and your customers.

For more information about what we offer click here to contact us today.

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