Modern Arms Race: Semiconductor shortage begins to take hold

Silicon chips are the lifeblood of the tech-obsessed world we live in, but today they’re in short supply. Many industries, from car makers to aviation, are being affected by shortages.

Demand for these chips, also known as semiconductors, has soared during the coronavirus pandemic, and countries are stockpiling in what has been described as a new-age arms race.

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Interesting developments. Photo: LWE

SEMICONDUCTOR SHORTAGE

There are two key elements that make up much of the technology that powers our world. 

The first is software-driven — algorithms, operating systems, and low-level functions to control the flow of data, regulate heat and do other on-chip/near-chip housekeeping functions. 

The other piece is the hardware, which includes memories, storage, various types of processors, on-chip networks, and a variety of other components and IP.

Semiconductor manufacturing is essential tradecraft, a critical hardware component of high-performance electronics. Found in everything from smartphones to guided missiles. 

Today, the technology trade war has taken an unexpected turn as we enter the year of 2021, with a semiconductor shortage is taking hold across the world.

Qualcomm chief executive, Cristiano Amon, has recently announced a serious shortage of semiconductor chips that is impacting a range of industries. 

Amon is just one of several semiconductor leaders warning of the shortages, which is hitting the automobile manufacturing industry the hardest.

Bloomberg reports that, “carmakers appear in direst straits and have spurred the U.S. and German governments to come to their aid.” 

General Motors “was forced to mothball three North American plants and Ford Motor Company is bracing for a 20 percent drop in near-term output.” 

It adds that, “chip shortages are expected to wipe out $61 billion of sales for automakers alone.

While the news continues to discuss coronacircus content, a number of supply chains continue to break down across the world. This time, it isn’t food supplies that are affected, with a new economic frontier being eroded.

The reason as to why this is happening may surprise many.

A new type of digital arms race is currently underway.

THE NEW ARMS RACE

In the early days of the COVID-19 pandemic, manufacturers of electronics and vehicles first drastically cut back their demand for chips, but then reversed course and demand skyrocketed. 

One factor adding to the problem is chip stockpiling. Under the threat of U.S. sanctions, Huawei Technologies began hoarding components. In 2020, Chinese imports of “chips of all kinds climbed to almost $380 billion.” In response, Apple and other rivals began their own hoarding.

“There’s a chip stockpiling arms race,” said Drop co-founder and chief product officer Will Bright, whose company uses custom chips in headphones and keyboards. 

This new international problem highlights manufacturing reliance on outsourcing chip production to companies such as Taiwan Semiconductor Manufacturing Company (TSMC).

Top electronic brands do not manufacture their own chips but procure them from TSMC, which controls around half of the worldwide chip-making market, ahead of both Samsung and Intel. 

TSMC reported that, “customers have been accumulating more inventory than normal to hedge against uncertainties.” The hoarding has made it very difficult for “smaller-volume buyers such as the makers of cars and gaming consoles.”

Why are major tech companies stockpiling chips to cause worldwide shortages?

This pivotal position at the center of the global semiconductor trade has drawn sharper focus ever since China and the US renewed trade hostilities, as both superpowers attempt to assure their own supply of precious semiconductors while politicking around the other.

In a tech-driven world, the consequences of these shortages is expected to escalate, and it isn’t just the automobile manufacturing industries that are at risk.

Almost all types of technology are reliant on semiconductors.

OTHER INDUSTRIES HIT

Demand for these chips has soared during the coronavirus pandemic, as people snapped up games consoles, laptops and TVs to help get through lockdowns.

Meanwhile, MinebeaMitsumi — a vital supplier to the transport and electronics industries — suggested shortages may plague even more sectors, including aviation.” 

“Demand is springing up everywhere at a faster-than-expected pace,” said chief executive Yoshihisa Kainuma. “Airlines around the world are scrapping old aircraft to slim down their balance sheet. And people’s desire to travel will explode after the pandemic.”

Apple revealed that sales of new high-end devices were hemmed in by a shortage of components, while Europe’s NXP Semiconductors and Infineon Technologies have both indicated the constraints are no longer confined to autos.

“The virus pandemic, social distancing in factories, and soaring competition from tablets, laptops and electric cars are causing some of the toughest conditions for smartphone component supply in many years,” said Strategy Analytics analyst Neil Mawston.

He estimates prices for key smartphone components, including chipsets and displays, have risen as much as 15 percent in the past three to six months.

Biden administration officials, along with Qualcomm and Corning executives and the Semiconductor Industry Association, are planning to meet with their Taiwanese counterparts and the island’s top industry representatives, including TSMC.

On one hand, it is good to see the tech-industry that rules over our lives be disrupted in such a way that may bring them back down to earth.

On the other, it seems as if there is a calculated attempt to short the market and ensure that the digital trade war is heavily influenced. This isn’t good.

Remember, the Great Reset Agenda is focused heavily around the digital revolution.

I think back to when Vint Cerf, a “father of the internet” and director of Google, said we will one day go through a ‘digital dark age’.

Do they know something we don’t know?


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1 comments on “Modern Arms Race: Semiconductor shortage begins to take hold”

  1. Control.
    A cyber attack is on the way. When the internet is turned off, when every bank account is zeroed, when all digital ownership records a purged we will see the reset agenda in full.

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