What you need to know about the global chip shortage

What you need to know about the global chip shortage.

By ADAM GOUDGE

The pandemic has had a few surprising side effects, not the least of which it has lead to a global shortage of computer chips affecting a wide range of industries.

Computer chips are everywhere. There are dozens in every car, helping regulate engine temperatures and stabilize suspension systems. They manage water treatment plants, power lines and Internet cables. Almost any product that plugs into a wall now carries a tiny computer inside. The modern world runs on them.

And now there are not enough of them.

How does a viral pandemic cause a computer chip shortage?

Last year we all thought the world’s economies would grind to a halt, here in Australia our federal government predicted this and introduced the JobKeeper scheme.  JobKeeper was wildly successful, it kept money in people’s pockets and kept our economy going.  It was so successful that people started going out and buying new toys, they bought new TV’s, new cars, new mobile phones and everything in between and all of these devices have dozens of computer chips in them.

In March 2020 Victorians were told that if we can work from home, we should work from home and we all listened, we left our offices in droves, we just about emptied the Melbourne CBD. With so many people working from home computer equipment sales went through the roof, stocks of new computers, monitors, printers and webcams were brought up putting further pressure on the global supply of the silicon chips that are at the heart of all these devices.  This happened not just in Victoria but in cities all over the world and it is still happening today.

Why don’t they just make more chips?

They are but that’s only part of the story.  The manufacture of advanced silicone chips is not a simple task, it requires extraordinarily expensive manufacturing plants to make them and there are only a few hundred plants in the world, many of which can only make certain types of chips.  These plants are all running at 100% capacity.  Some companies such as Intel have announced they are building more manufacturing plants or ‘fabs’ as they are known but these fabs cost billions of dollars to build and often take several years before they are ready to start producing silicon chips.

Where does all this leave us?

Not in a good place I’m afraid.  If you want to buy a new car you might be facing a wait of 6+ months, new computers are becoming more and more difficult to source with delays of up to 3 months on some models.  Of course with high demand comes higher prices, a car that you might have paid $70,000 for 12 months ago will cost you almost $100,000 today, the same with computers, the same with mobile phones and everything else with a silicone chip in it.

There’s no happy ending here, electronic goods are going to remain in short supply for some time and the cost of those goods are increasing every day.  Sorry for the bad new folks.