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What’s causing the global chip shortage?

By Chika Dunga
Published Last updated

Still waiting on a particular pair of headphones to come back in stock? You’re not alone. The global chip shortage has disrupted the supply for practically everything that plugs in. When Covid-19 sent millions of people indoors, demand for laptops and other computer accessories skyrocketed. Chip manufacturers couldn’t keep up, leading to the current backlog.

Demand outpacing supply is normally a good problem to have in business. But for chips, the bottleneck is hurting a number of industries. Chips—also known as semiconductors—are the brains of the devices we depend on to live and are found in almost everything from cars to phones. Not having enough chips means that companies can’t manufacture products. The automobile industry knows this very well—during the pandemic, car production lines all over the world have come to a halt, and the industry is expected to lose $110 billion in revenue in 2021.

Not everyone can make chips to fix the shortfall, however. A factory takes years and billions of dollars to construct; even once it’s up and running, chips can take several months to produce. Today over 50% of the world’s chips are produced in Asia. In order to keep the supply of chips flowing independent of geopolitical factors, a number of governments are crafting strategies to build more plants within their borders. This will help not only to diversify the supply chain but also increase global manufacturing capacity.

Read our latest presentation to learn more about the global chip shortage.

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