- There is a shortage of computer chips accelerated by disruptions caused by a pandemic in the supply chain.
- Car manufacturers have technology chips in their cars, and companies like Apple need them to power their gadgets.
- With only a few chips available, industries are suffering as they struggle to meet demand.
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A group of lawmakers is asking the Biden government to intervene in what has become a global shortage of computer chips.
“We believe that the new government can continue to play a useful role in alleviating the worst impacts of the American labor shortage,” the senators wrote in a letter.
So, what is happening?
Carmakers and consumer electronics companies are vying for computer chips
These chips have become a crucial part of the supply chain.
Automakers like Ford use them to drive modern technology in their vehicles – the engine, Bluetooth features, seat systems, collision and blind spot detection, broadcasts, WiFi and video display systems, all run on the chips.
And it’s the silicon components that drive the high-tech gadgets from companies like Apple that we use every day. Up-to-date technology on game consoles and 5G smartphones in particular requires much more power and therefore depends more on chips than previous generations.
Since March, when the pandemic broke out, consumer demand has increased for vehicles and devices such as smartphones and game consoles that people can use for entertainment while at home.
Automakers such as General Motors, Toyota, Ford and Subaru, to name a few, were forced to close factories early in the pandemic. When factories reopened, customer demand for cars skyrocketed, as people, stimulus checks in hand, took the opportunity for low interest rates and a way to get around that did not involve mass transportation.
The automakers responded by increasing production to maximum levels, further increasing demand – and competition – for computer chips.
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Meanwhile, chip industry players like Intel were already struggling to keep up with demand, even before the pandemic. And chip makers abroad were also facing supply chain disruptions as the pandemic forced them to close factories.
Even with chip makers doing very well during the pandemic, such as Taiwan Semiconductor Manufacturing Company – which produces more than half of the world’s computer chips and is also Apple’s main supplier – there is still not enough supply for everyone.
Scarcity doesn’t seem to be going down anytime soon
Computer chip makers are operating at full capacity and it is not feasible for companies to build factories to offset the increase in demand, Bloomberg said.
Phone makers like Apple are better prepared to pay higher prices for chips than car makers, according to an analyst who spoke to Bloomberg. This does not mean that the phone manufacturers have not been negatively affected by the chip shortage – Apple would have faced problems supplying chips to power its iPhone 12 models equipped with 5G, which debuted in October.
But the auto industry specifically felt the pinch, and some even had to stop production due to shortages. Ford and Fiat are temporarily halting production because they don’t have enough chips.
Without enough chips on offer, the auto industry could lose $ 61 billion in 2021, according to consultancy Alix Partners, as published by Bloomberg.