Remember the run on PS5 consoles?
PS5 was only the tip of the iceberg
Factories closing for lack of chips
Semiconductors: essential for cars
One million fewer cars
Where do chips come from?
Why aren't there enough chips?
More technology consumption
The pandemic changed supply chains
Other sectors got the cars' chip supply
Is China hoarding chips?
Dependence on a few producers
Another challenge: keep chip prices from going up
The world economy is out of balance
Demand for chips will continue to grow
How do producers try to solve the problem?
Shortage continues until at least 2022
Longer wait for new smartphone models
A brake on post-pandemic recovery
Red alert: Chip shortage hurts the world economy
(1/19)
Remember the run on PS5 consoles?

A few months ago it was very difficult for consumers to get their hands on the new PS5. Several factors had hindered the production of the console, and one of them was the shortage of chips.

(Image: Kerde Severin / Unsplash)

Red alert: Chip shortage hurts the world economy
(2/19)
PS5 was only the tip of the iceberg

There are chip shortages in many industrial sectors. Without chips, the production of many important commodities such as consoles, cars, and electrical appliances is impossible.

(Image: Umberto / Unsplash)

Red alert: Chip shortage hurts the world economy
(3/19)
Factories closing for lack of chips

The shortage has reached the extreme point in which factories are closing. This is the case with car factories in Spain, for example. What's happening with the supply of chips?

Red alert: Chip shortage hurts the world economy
(4/19)
Semiconductors: essential for cars

First of all, it should be noted that chips, which we also call semiconductors, are essential for many details of the operation of a car or truck.

 

Red alert: Chip shortage hurts the world economy
(5/19)
One million fewer cars

The European Association of Automobile Suppliers estimates that the lack of chips, also called semiconductors, will inhibit the production of 500,000 vehicles in Europe. According to other calculations, a million fewer cars will be produced worldwide.

Red alert: Chip shortage hurts the world economy
(6/19)
Where do chips come from?

The world production of chips or semiconductors is mainly based in China and Taiwan. They manufacture around 70% of all car chips. South Korea also has some part in the sector.

Red alert: Chip shortage hurts the world economy
(7/19)
Why aren't there enough chips?

At the moment, the producing countries are incapable of meeting the high demand for the chips. Global demand for semiconductors has skyrocketed in the past months and they simply cannot produce that many chips that fast.

 

Red alert: Chip shortage hurts the world economy
(8/19)
More technology consumption

Why did the demand skyrocket? Confinement and teleworking have multiplied the consumption of technological products. And every technological product needs chips.

Red alert: Chip shortage hurts the world economy
(9/19)
The pandemic changed supply chains

In addition, during the pandemic car manufacturers temporarily made fewer cars. As their demand of chips declined, Taiwan and China sent their chips to other industries instead.

(Image: Chris Ried / Unsplash)

Red alert: Chip shortage hurts the world economy
(10/19)
Other sectors got the cars' chip supply

Semiconductor producers now continue to give priority to those other sectors, even though the car industry is fully operative again.

(Image: Rob Lambert / Unsplash)

Red alert: Chip shortage hurts the world economy
(11/19)
Is China hoarding chips?

And then there is the corresponding conspiracy theory (which may in this case contain a core of truth) that China is keeping much of the chip production for itself in order to have an advantage in the global market.

Red alert: Chip shortage hurts the world economy
(12/19)
Dependence on a few producers

The world industry is now realizing that semiconductor production should not be concentrated in one region only. In case of increased demand, there should be an alternative supplier of the valuable product.

(Image: Onur Binay / Unsplash)

Red alert: Chip shortage hurts the world economy
(13/19)
Another challenge: keep chip prices from going up

And there's another problem: the price of chips cannot be too high. It is already an expensive product, and if the price of a semiconductor rises further, many sectors in the global economy will suffer.

(Image: Jonas Svidras / Unsplash)

Red alert: Chip shortage hurts the world economy
(14/19)
The world economy is out of balance

The chip crisis is a demonstration of how the global market has certain imbalances. Economists say that they should be corrected. The concentration of production in certain places may cause global problems in crisis situations.

(Image: Noel Broda / Unsplash)

Red alert: Chip shortage hurts the world economy
(15/19)
Demand for chips will continue to grow

The demand for chips will certainly grow in the coming years. Technology increasingly needs them.

(Image: Ant Rozetsky / Unsplash)

Red alert: Chip shortage hurts the world economy
(16/19)
How do producers try to solve the problem?

To face this chip-hungry market, semiconductor producers like TSMC in Taiwan are planning to invest $100 billion in production efficiency over the coming years. Samsung is talking about about investing $31,000 million in the short term.

Red alert: Chip shortage hurts the world economy
(17/19)
Shortage continues until at least 2022

Some analysts believe that the current imbalance between supply and demand for chips will not be adjusted until 2022.

Red alert: Chip shortage hurts the world economy
(18/19)
Longer wait for new smartphone models

The chips are causing the new smartphone models to arrive on the market with a delay.

(Image: Rami Al Zayat / Unsplash)

Red alert: Chip shortage hurts the world economy
(19/19)
A brake on post-pandemic recovery

The bigger picture is that, due to the shortage of chips, the world's economic recovery after the pandemic has slowed down.

(Image: Christopher Burns / Unsplash)

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