Because the chip shortage drags on over and over … and over

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The semiconductor industry lives at the forefront of technological progress. So why can’t it churn out enough? chips to make the world move?

With nearly two years of outages caused by the pandemic, a severe shortage of computer chips – the building blocks of smartphones, laptops and countless other products – continues to affect manufacturers across the global economy.

Car manufacturers have been forced to stop production in recent months since drop in sales because they can’t make enough machines. The shortage has hit the industries by game console Other network equipment to medical devices. In October, Apple blamed shortage of chips to crimp its financial results, and Intel warned that the drought is likely to extend into 2023.

In short, the semiconductor supply chain has stretched in new, deeply entrenched and hard-to-solve ways. Demand is growing faster than chip makers can respond, particularly for basic but popular components that are subject to the kind of large variations in demand that make investments risky.

“It is absolutely amazing that it took so long for the supply chain to recover after the global economy stalled during Covid,” says Brian Matas, vice president of market research at IC insights, an analytics company that tracks the semiconductor industry.

For one thing, the breadth of demand was surprising. In 2020, like Covid started to turn around as usual, the chip industry was already expecting a recovery. Worldwide chip sales fell 12% in 2019, according to the Semiconductor Industry Association. But in December 2019, the group predicted that global sales would increase 5.9% in 2020 and 6.3% in 2021.

In fact, the latest data show that sales grew 29.7% between August 2020 and August 2021. Demand is driven by technologies such as cloud computing Other 5G, along with the growing use of chips in all types of products, from automobiles to home appliances.

At the same time, sanctions imposed by the United States on Chinese companies such as Huawei, a leader in the production of smartphones and network devices, have prompted some Chinese companies to start accumulating as much stock as possible.

The surge in demand for high-tech products triggered by work from home, block woes, and the shift to e-commerce has continued, taking many by surprise, he says. David Yoffie, a Harvard Business School professor who previously served on Intel’s board of directors.

Chip makers didn’t like the scale of sustained demand until about a year ago, Yoffie says, but they can’t light up a dime. The new chip factories cost billions of dollars and take years to build and set up. “It takes about two years to build a new factory,” notes Yoffie. “And the factories have gotten a lot bigger, a lot more expensive and also a lot more complicated.”

This week, Sony and Taiwan Semiconductor Manufacturing Company, the world’s largest contract chip maker, She said They would invest $ 7 billion to build a factory capable of making older components, but it won’t start making chips until the end of 2024. Intel it is also investing in several new state-of-the-art fabs, but not even those will be online until 2024.

Yoffie notes that only one company, ASML from the Netherlands, makes the extreme ultraviolet lithography machines required for cutting-edge chip production, and ASML cannot produce the machines fast enough to meet demand.

Another problem is that not all chips are created equal.

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