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2021.04.17 00:34 GMT+8

Global chip shortage is a 'perfect storm'

Updated 2021.04.17 00:34 GMT+8
Michael Gray

How to get your hands on semiconductor chips is one of the most pressing questions facing leaders and CEOs across the globe.

The world has become dependent on chips. They're now at the heart of everything from smartphones to cars and medical equipment.

Without them, factories grind to a halt. This has been most obvious in the automotive industry, where major car makers such as Nissan and the Chinese electric vehicle maker Nio have cut production due to a lack of chips.

 

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Chinese electric car maker Nio temporarily halted production due to chip shortages. /Reuters/Brendan McDermid

 

"There are only a few chip makers in the world these days," says Matt Hanson, senior editor for TechRadar. "And they have a lot of big customers with a lot of big orders."

The demand for electrical goods during pandemic lockdowns and supply chain issues has laid bare this global reliance on a few chip makers. 

The world's biggest contract chip maker is Taiwan Semiconductor Manufacturing Company (TSMC), often referred to as the most important company you've possibly never heard of.

Shares in the company have more than doubled over the past year and this week it topped expectations with its quarterly results. TSMC also warned demand may continue to outstrip supply into 2022.

 

'Extra Pressure'

"It's a bit of a perfect storm," according to Hanson.

"One thing that has added extra pressure to this is that cryptocurrency mining has taken off again. And that requires a lot of people using graphics cards," he adds.

"Until that bubble bursts, I think there's going to continue to be quite a lot of pent-up demand for these chips."

For the time being, cryptocurrencies are soaring. Bitcoin hit a record high of $64,000 this week and the cryptocurrency exchange Coinbase made its stock market debut in New York.

 

Cryptocurrency exchange Coinbase made its stock market debut in New York on Wednesday. /Reuters/Shannon Stapleton

 

Import record

China imported a record number of semiconductors in March, worth more than $35 billion, but governments are acutely aware of the need to become more self-sufficient in producing chips.

In the final weeks of Donald Trump's presidency, Washington imposed sanctions on China's biggest chip maker SMIC over alleged connections to the Chinese military.

His successor, President Joe Biden, says his $2 trillion infrastructure spending package, designed to stimulate the U.S. economy after the pandemic, will include $50 billion to boost the country's chip industry.

 

U.S. President Joe Biden is pushing for $50 billion of investment to support the semiconductor industry. /Reuters/Jonathan Ernst

 

Chip makers like TSMC are "going to invest money… and I think they're going to invest that in new locations, new plants to help increase capacity," says Hanson.

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