Why is there a shortage?
Technology professionals understand that the microchip shortage was initiated by the COVID-19 pandemic, which caused a massive buying surge for laptops and other electronic devices needed by work-from-home staffers and students being home-schooled. Yet that was only the beginning. It was followed by a perfect storm of complicating factors that converged on the semiconductor industry almost simultaneously. After the pandemic’s initial surge came a supercycle of demand for chip upgrades driven by waves of new technologies, including new 5G networks, expanding cloud services, and AI services. At the same time, global lockdowns were causing labour shortages that forced chip production facilities to shut down, further depleting inventories. Even the weather got involved, with a severe drought impacting the water supply which affected chip production in Taiwan. In addition, the trade war, including U.S. sanctions, put a squeeze on the supply of advanced chips in China.
All of this just proved too disruptive for the industry to absorb. But it didn’t stop there. The global electric vehicle market started to grow significantly putting even more demand on already stretched supply lines and then finally war in Ukraine has added even more uncertainty due to the globe’s dependency on inert gases (used in many areas of the semiconductor manufacturing process) supplied from the region.