Semiconductor Shortage and Its Cause

The world economy is facing a shortage of semiconductor chips since global chip suppliers cannot meet the growing demand of tech companies. Semiconductors are major components of electronics, and the shift towards ‘smart’ devices has created a surge in demand for these components. Industries that didn’t use semiconductors previously now comprise some of the major sources of demand, such as automakers that shifted towards putting in touch screens and computers in cars.

There are multiple reasons why semiconductor factories have been unable to meet corporate demands; however, the primary reason is due to high associated costs and factor issues. Semiconductors are expensive because manufacturing factories are costly and take a long time to build. Furthermore, the workforce needs to be highly skilled and existing factories are struggling to employ enough people. These reasons are why manufacturers cannot just increase their supply.

Worse, the general supply chain issues exacerbate the current conflict. Some key suppliers suffered from fires that burned chips down, resulting in a shortage of supplies for chip manufacturers. The rising transportation costs around the globe have put a strain on supply chains in general across industries. After facing the pandemic, industries canceled semiconductor orders following a fall in sales. Though the economy slowly rebounded and the demand for semiconductors surged in 2020, manufacturing companies were unable to meet the increase in demand for semiconductors, resulting in semiconductor scarcity.

The semiconductor industry has become one of the world’s most noteworthy industries as electronic devices have been introduced into various industries due to the advancement of technology. Although this may seem pleasant, if the problem of the semiconductor shortage becomes more serious, it will put a great burden on the economy.

By: Brenson Ha