Anyone who reads the business pages cannot have failed to notice that the semiconductor industry has faced its fair share of upheaval over the past few months. The impact of this disruption on the automotive and consumer electronics sectors has garnered plenty of headlines, mainly related to production delays. But demand for chips affects a huge number of other industries – some of which have received little attention.
To recap, demand for chips has been growing over the past decade as an increasing array of devices, from cars and consoles to smartphones and smart meters, have required computing power to work.
Alongside this growing demand, trade disputes – think China and the US – and COVID-19 have added unwanted turmoil. Some companies ordered more chips than usual in 2020 as they hoarded them in light of pandemic-induced uncertainty over how long disruption to their supply chains would last, for example. Others cut their chip orders when the pandemic struck and were unable to order enough when demand for their products started to return. Overall, supply has not been able to keep up with demand, leading to a global chip shortage that has manifested itself in much longer lead times.
Increasing supply is not easy to do. Foundries, the businesses that manufacture chips, are reported to have been working at full capacity to try and keep up with demand but they take years and lots of money to set up. The end result is that consumers risk paying higher prices now or having to wait longer than anticipated for products that they wish to buy.
Although car, computing, and electronics manufacturers, along with telecommunications firms, account for the majority of global chip demand, there is a long list of other industries that also rely on them. Payment cards, for example, may not have the same ticket price as a Tesla or a PlayStation, but their importance to billions of people and businesses around the world make them a crucial cog in the global economy.