The Daily Update: Semiconductor Shortage

The global shortage in semiconductor chips that has been hampering production of anything from game consoles to cars is getting worse. Automakers alone expected to lose around USD 110bn in sales this year as the crisis will hit the production of nearly 4m vehicles. According to a report by Susquehanna, the lead time to order new chips has increased to 17 weeks, the longest wait since the firm began tracking the data in 2017.

On top of many companies over ordering and hoarding chips in an effort to safeguard supply, the resurgence of coronavirus cases in Taiwan has also had a major effect. The manufacturing of higher-end processing chips is dominated by Taiwan with 92% of the world’s most advanced semiconductors made by Taiwan Semiconductor, also known as TSMC. Also not helping is Taiwan is also in the grip of a heatwave and drought, leading to phased blackouts across the island.

The problems began at the start of the pandemic last year with a surge in demand for chips due to soaring sales of laptops, mobile phones and tablets as many were forced to work from home. Now the world is reopening, with people having money to spend, the tech giants and others continue to play catch up.

Tomorrow, US Commerce Secretary Gina Raimondo, plans to hold a summit with many of the companies affected by the semiconductor shortage, bringing together both suppliers and consumers of chips. Last week Raimondo acknowledged there was no ‘quick fix’ to the problem, even though her boss vowed to ensure the U.S. never faces a shortage again. ‘We’re in constant contact with the auto companies, the semiconductor companies. We're going to try to do what we can to ease the shortage short-term but in the long run the solution is to be less reliant on China and Taiwan and make more chips in America’ Raimondo said.

As part of his infrastructure plan announced earlier this year, Biden has proposed USD50bn in semiconductor research and development funding which he hopes will pave the way for the US to become self-sufficient in chip production in the medium term.