Industries Delayed by Semiconductor Chip Shortage

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The Latest on the Ongoing Semiconductor Chip Shortage

Remember back towards the end of last year when there was mass excitement over the new release of the Sony PS5 and the newest version of Microsoft’s Xbox, only to find out everything was on backorder? Even cell phones and computers at that time were on backorder and it seemed like nothing was available to consumers. At the time it seemed like any misfortunes were directly related to the COVID pandemic, and rightfully so. However, the true problem came with a shortage of semiconductors in the US. These tiny little chips have a huge impact on almost everything we use, from consumer electronics to cars we drive. When there are no semiconductors to power our gadgets and vehicles, they get put on backorder until there are. The question we are all asking, is when will that be?

The easy answer is that the ongoing semiconductor shortage in major industries such as automobiles, TVs, and smartphones will continue throughout the first half of 2021. Demand for semiconductors for PCs, mobile devices, automobiles, and wireless communications began to surge from the third quarter of 2020, with demand surging in the consumer electronics and automotive sectors.

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What caused the shortage?

The supply shortage was caused by semiconductor companies failing to predict demand from major corporate customers producing home appliances, mobile devices, and automobiles. In the third quarter of 2020, global sales of automotive semiconductors fell 5.6 percent when major automakers’ production fell due to the COVID-19 pandemic. The fourth quarter sales unexpectedly rose 28.3 percent from the previous quarter as the demand for automobiles soared due to a recovery in consumer confidence. Not only did this happen in the automotive industry but also with TVs and home appliances. Sales of TVs and home appliances spiked sharply since the third quarter when demand suppressed by the COVID-19 pandemic began to shoot up.

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The effects of the semiconductor chip shortage

Not only have we started feeling the effects of the chip shortage on a consumer level, but it has hit the computing and auto sectors on a much grander scale. Originally, Argonne's Aurora system was expected to be the first exascale supercomputer - a system capable of performing more than a billion (1018) operations/sec. Instead, Frontier will be the first US supercomputer, launching next year. The Aurora supercomputer has been delayed indefinitely due to ongoing Intel manufacturing issues.

With Aurora planned for mid-2021 and featuring GPUs that were pushed to the end of next year or into 2022, a delay on the supercomputer seemed inevitable. Intel kept the possibility open that it might manage to hit its deadline by relying on rival chip foundries. It is still uncertain how serious Intel's production problems are. Initially, Aurora was not intended as an exascale system, but was upgraded due to a different Intel chip problem. Aurora was destined to launch in 2018 as a 180 petaflops supercomputer featuring Intel's Xeon Phi chips. But when Phi was delayed, soft-launched, and then canceled, Aurora was pushed back and re-architected with new processors, as an exascale system.

The computer chip shortage is taking a bigger toll on automobile production than originally expected. General Motors has announced that three of its North American plants would be closed this week due to the chip shortage. The chip shortage has become a major and growing problem for major automakers around the world. Automaker Ford announced that its first quarter production would be cut by between 10% to 20% because of the chip shortage, and potentially cost the company between $1 billion and $2.5 billion in the upcoming year.

The average car has between 50 to 150 chips in it. The chip shortage will influence operations at automakers as well as their suppliers, who account for far more jobs than assembly plants. Similar to the consumer electronics market, automakers cut back computer chip orders early last year when the pandemic caused temporary plant closures. When car sales bounced back sooner than expected, it left the industry in a sticky situation.

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Chip manufacturers are fighting back

A series of U.S. semiconductor chip manufacturers including Intel, Qualcomm, Micron Technology, and Advanced Micro Devices, sent a letter to President Joe Biden seeking funding for incentives for semiconductor manufacturing. Chips are mostly manufactured in countries such as Taiwan and Korea, which have come to dominate the industry. The U.S. share of semiconductor manufacturing dropped from 37% in 1990 to 12% today.

The new White House administration has pledged to take "aggressive steps" to deal with the global shortage of processors that power modern technologies. The US government is trying to pinpoint the bottlenecks in supply chains to prevent future traffic jams caused by problems in the semiconductor industry. President Biden is expected to sign an executive order leading to a 100-day formal review of chip shortages. Major semiconductor manufacturers are urging President Biden to permanently bring chip production back to the United States. 

A draft of the order suggests an analysis of supply chains involving processors, medical supplies, packaging, and batteries used in products including electric vehicles. The shortage of semiconductors is hurting the domestic production of goods, with automakers severely feeling the impact. Processors are used in everything from smart cars to gaming consoles. There has been a shortage for years of some chip designs, but the disruption caused by COVID-19 at production plants has further exacerbated the problem.