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There’s a serious problem affecting the world of consumer electronics right now, and it has to do with semiconductors. In essence, this essential component of many electronic goods – including games consoles, smartphones, and PC graphics cards, among other things – is in drastically short supply. If you’ve tried to get your hands on a PlayStation 5 or an Xbox Series X – or one of Nvidia’s RTX 30 series cards – and been unable to locate one, this chip shortage is the culprit.
So, why is this happening, and when can we expect it to be over? As you might expect, the answer to both of these questions is not straightforward. There are a number of factors affecting whether or not electronics manufacturers can get their hands on semiconductors, and they’re not all easily solved. COVID-19 is, of course, part of it, but there’s more to the situation than the pandemic. Here’s our rundown of the global chip shortage and when we might be able to see the other side of it.
What is a semiconductor?
First, it might be helpful to understand exactly what the part is that’s causing so much fuss. As you might expect from the name, semiconductors partly conduct electricity, and they help to manage electrical current flow. While it may be possible to create many of today’s devices without the use of semiconductors, a lot of electronics – including cars and white goods – require semiconductors to operate, so if there aren’t any around, then manufacturers find themselves at a loss.
Okay, so why is there a shortage?
While the chip shortage doesn’t have everything to do with COVID-19, it’s certainly a big part of why semiconductors are in such short supply. When the pandemic hit, many factories either closed or severely reduced their hours, and the customers of these factories – namely manufacturers of electronic goods – cancelled orders for fear the pandemic would cause an economic slump.
In fact, the opposite happened. The coronavirus made many of us even more desperate for consumer electronics than we had previously been. This meant that although the demand for such goods skyrocketed, the supply simply wasn’t there because factories had closed and manufacturers thought there would be no interest. It’s still going on because of the sheer scale and scope of this process.
The pandemic is now less severe in many places – will this help?
It could, but right now, probably not. While factories are returning to pre-pandemic levels of operation, there’s still a major shortage; semiconductors can take up to four months to produce and manufacture, and when there’s a shortage like this, every order you create is simply going to go to a back-order or to fulfil demand that went unfulfilled at the beginning of the shortage.
However, there is light at the end of the tunnel, so to speak. Semiconductor manufacturing is improving, and the demand for these chips is likely to subside somewhat as consumers return to spending money on non-electronic-related goods and pursuits, like vacations or going out for meals. Things are improving, but it’s a very slow process.
Are there other problems arising due to the chip shortage?
Absolutely. The chip shortage is itself a worrying proposition, because it’s likely going to result in a loss of profit for manufacturers, but it also means many of the electronic goods we want – the PS5, for example, or the RTX 3080 graphics card – aren’t widely available. While this isn’t necessarily a severe impediment to our lives, it definitely makes living in a pandemic-stricken society a little worse.
There’s also the issue of the counterfeit semiconductor market soaring in the wake of fewer legitimate options. Counterfeit chip manufacturers are growing bolder and less cautious; there’s a desperate demand for these items, and anyone who’s perceived to have one will therefore have a dedicated market, whether or not the goods are for real. It’s something many traders need to be on the lookout for.
What can we do to prevent this happening in future?
To put it simply, the only way we can stop another chip shortage happening is either to reduce our reliance on semiconductors or to ensure the factories remain open during a crisis. The second isn’t really possible, because we can’t predict the nature of any catastrophic event, so we have to work with what we’ve been given. With that in mind, how viable is the first option?
It’s difficult to talk about whether this is possible without getting seriously nerdy, but the simple answer is that without seriously changing our blueprints or making a miraculous new discovery, it’s not really possible to make our current electronics without semiconductors. If a PS5 arrived without this chip, it probably wouldn’t resemble the way a PS5 works now, so we need to resolve the shortage ASAP.
When will the shortage end?
This is the million-dollar question. We’re not expecting the chip shortage to come to an end before 2022, realistically, but whether or not it does depends on a number of factors. For a start, demand needs to remain as high as it is right now in order for the chip shortage to continue without signs of improvement. As we’ve discussed, that may or may not happen depending on consumer spending habits.
In addition, if factories do manage to ramp up their production – and demand does drop a little – then we may see a quicker ending to the chip shortage. However, if things continue as they are right now, it’s likely we’re going to see shortages well into 2022 and possibly even into the first half of 2023. Things look grim, but there’s always hope, so we’ll have to wait and see what happens.
