What caused global shortage of computer chips that power our planet?

Edited By: Gravitas desk WION
New Delhi, India Published: Mar 02, 2021, 11:02 PM(IST)

China's chipmaker Photograph:( Reuters )

Story highlights

Computer chips silently power an array of products - smartphones, tablets, smartwatches, and even smart cars, but now the world is running short on them

The world is witnessing a shortage of computer chips, which is affecting the production of everything ranging from smartphones to smart cars.

Computer chips silently power an array of products - smartphones, tablets, smartwatches, and even smart cars, but now the world is running short on them. A global shortage of semiconductor chips is affecting almost everyone - consumers and manufacturers alike. Last month, car maker General Motors decided to close three factories due to the shortage of microchips. Soon after, Toyota, Volkswagen, Ford, Honda, and Fiat Chrysler followed suit.

No industry remains untouched from this shortage, not even video games. Sony's highly demanded Playstation 5 may not be able to sell as many units as anticipated owing to the shortage.

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With several industries taking a hit, last week US President Joe Biden made an intervention after meeting a bipartisan group of lawmakers. Biden even signed an executive order to address the scarcity.

Also read: Taiwan pips China in economic showdown after 30 years, as chips demand soars

"Recently, we've seen how a shortage of computer chips, computer chips like the one I have here [Biden takes out computer chip], you can hardly see it I imagine, it's called a semiconductor. It's caused delays in the production of automobiles that result in reduced hours for American workers. A 21st-century horseshoe nail", US President Joe Biden had said.

What caused the shortage?
Multiple factors contributed to the shortage, including the ongoing COVID-19 outbreak. During the pandemic's peak, there was a spike in the demand for electronics.

Newer technologies like 5G-enabled smartphones require a lot more computer chips than older phones, which has compelled electronic companies to buy chips in excess leading to a shortage in the market. Former US President Donald Trump's trade war has also impacted the industry. SMIC - a semiconductor company, which is partially owned by the Chinese government supplies around 10 per cent of the global demand.

Last year, the US government had restricted American exports to SMIC, affecting the supply of the technology used to make the chips. Experts believe the present shortage may last a while and may make consumer electronic products more expensive. It could also delay the rollout of new cars from leading manufacturers.
 

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