The lack of chips will hit more and more industries. The downtime period may take several years

The lack of chips will hit more and more industries.  The downtime period may take several years
The lack of chips will hit more and more industries.  The downtime period may take several years
photo: asharkyu / / Shutterstock

The chip shortage in the global market hit the automotive industry first, causing car factory downtime and forcing companies to cut production. As a result, according to ACEA, sales of new cars in Europe alone dropped by several dozen percent. The crisis has also spread to other industries, including on computer manufacturers. Market experts indicate that chip manufacturers will need up to several years to fully respond to the huge demand that continues to grow.

– The problem with the lack of chips results from a very basic principle that has governed the economy since the dawn of time, i.e. the mismatch between supply and demand – Wojciech Paprota, founder of Walltmor, tells Newseria Biznes. – Most of the chips are made in China. When a very hard lockdown was introduced there, the factories even stopped for several months and ran out of supplies. This was combined with the increased demand from producers, as we are increasingly moving away from the technology of burning coal and switching to being eco-friendly, drawing energy from renewable sources, which also entails a greater demand for chips.

On the one hand, the COVID-19 pandemic caused a surge in demand for electronics – from laptops and computers, through game consoles, to industrial robots. On the other hand, producers of integrated circuits, which are necessary for the production of electronics, faced significant difficulties in their operations, related to, among others, with lockdowns and outages. These problems continue to this day, and the internal energy crisis in China has also contributed to their deepening. It results from a coal deficit which causes electricity shortages and paralysis of industrial production.

– When we are unable to power a given factory through coal, it can only operate three days a week, not five or six, as it used to be before. This has little to do with the pandemic, and concerns China’s international policy, but of course the pandemic has added its three cents – says the founder of Walletmor, a company producing payment implants. – As a result, factories are still not able to reach the level where they would actually be able to supply all potential customers.

The so-called chip shortage has been exacerbated further for more than a year, since the post-pandemic recovery in the economy began, which resulted in an increase in demand. The chip crisis hit the auto industry first, causing car plant downtime and forcing companies like General Motors and Ford to cut production. As a result, according to the European Automobile Manufacturers Association (ACEA), in October last year. new car sales in the EU dropped by as much as 30.3 percent. and this compared to the same period in 2020, which was in the middle of the pandemic. In turn, in November last year. Registrations of new passenger cars in the EU have fallen for the fifth month in a row – by 20.5%, to just over 713,000. pieces. In quantitative terms, this result was the worst since November 1993.

– The problem of the unavailability of chips on the global market is large, but not huge. Remember that we currently have thousands of different types of chips. Others are used for the production of a payment implant, others for telephones or computers, and others for the production of the dashboard in the car and the entire on-board computer. So some industries and producers may not feel such a problem at all, and others may feel it on a very large scale – says Wojciech Paprota.

At the moment, the crisis that began with the automotive industry has spread to other industries, including on PC manufacturers. Market experts indicate that chip manufacturers will need up to several years to fully respond to the increased, huge demand.

– In fact, the only real sensible answer is to just wait. Not only for factories to return to normal, but also for new entities to appear on this market. Such a balance is created sooner or later – says the founder of Walletmor. – This period of downtime, mismatch between supply and demand in global, relatively large industries should last no longer than two or three years.

Cited by Bloomberg, CC Wei, the head of Taiwan’s TSMC, the world’s largest integrated circuit manufacturer, which owns more than half of the global market, announced that the company is working intensively to increase production capacity. It intends to spend around $ 100 billion on the expansion of its factories over the three years.

– Nowadays, when the chip is in every electronic device, it is difficult to talk about any other solution that could replace these chips. For today there is nothing that could be an alternative – says Wojciech Paprota.

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About Eric Wilson

The variety offered by video games never ceases to amaze him. He loves OutRun's drifting as well as the contemplative walks of Dear Esther. Immersing himself in other worlds is an incomparable feeling for him: he understood it by playing for the first time in Shenmue.

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