What’s the Deal With Chip Shortages?

By Angela Monroe - September 14, 2021

chip shortage h1

Some new car buyers are counting their delivery times in years (plural) – not days or even months.

Chip shortages are one of the main reasons.

Here’s what it all means.

Firstly, what are chips?

Also known as semiconductors, ‘chips’ means computer chips. 

Semiconductors make up many components in electronics. Basically, they partially allow electricity to pass through them.

This is unlike electrical conductors, for example copper, which allow electricity to freely flow or insulators, like rubber, which allow no electricity to flow through.

The electricity flow in chips (semiconductors) can be dialed up or down depending on the requirements.

It’s this controllability that makes semiconductors so important. It means they can act as tiny switches within electronic components.

If you’re reading this on a screen, it’s thanks to semiconductors – a lot of them.

Semiconductors

(some common semiconductors)

Chips in cars
Semiconductors in cars

Today’s vehicles compete more so in computing power than horsepower. Think of all the electronics in modern cars. Gauge clusters, navigation, media, screens, driver assist technology like adaptive cruise control, LED running lights, engine sensors… It’s a long list.

All this is possible thanks to semiconductors and the microchips they create.

An example of chips operating in cars is automatic headlights.

Cars with these systems have light sensors which monitor the outside light. When deemed dark enough, the electronic components will turn on the headlights. It’s semiconductors that are responsible for this automation.

Another example is your engine. It needs to use an oxygen sensor’s information to adjust the correct amount of air / fuel mixture – again, it’s chips to the rescue.

The shortage

cargo ship

Getting your hands on popular new products that contain semiconductors is tough right now. From game consoles to Toyotas, many buyers are getting frustrated.

Buyers of the new Toyota LandCruiser 300 Series, for example, might need to wait years for delivery as demand outstrips supply. Prices are also skyhigh.

Apple has also warned iPhone buyers that sales might be affected by the shortage.

It’s basically supply and demand problems.

Supply

Suppliers of semiconductors have not had a good run lately. The pandemic has caused supply chain problems, made worse by lockdowns in locations with factories as staff are unable to work in some cases.

Earlier this year, a semiconductor producer in Japan experienced a fire which caused production to drastically slow down. 23 machines were destroyed and the special clean room needed for chip manufacturing was filled with smoke and soot.

A storm in Texas shutdown semiconductor factories temporarily which has also caused problems. 

Lockdowns at ports around the world have also slowed transportation.

Demand increases

Online shopping, communications (Zoom calls for example) along with the need for faster devices that rely on faster internet speeds are all things that the pandemic has expedited.

Furthermore, modern products are requiring more chips, and more advanced ones. Compare previous model game consoles to today’s for example.

Building more chip factories takes time and money

Semiconductor factories require a lot of advanced machinery and highly skilled workers to operate it. That means a lot of investment, plus the time to get everything up and running.

Just like the pandemic, it’s likely we won’t be out of the chip shortage woods for a while yet.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

Comments

No comments yet.

Sorry, the comment form is closed at this time.

  • Quick Quote

  • Related Posts