If you love building computers, grabbing the latest car model, or your microwave oven has whirred its' last whirr and you are desperately searching for a replacement, you may have noticed a massive lack of supply of electrical products. Throughout the COVID-19 pandemic, computer chips have become almost unheard of, with the demand vastly outweighing the declining supply of silicon. This first began to affect computer components – trying to buy the latest graphics card or CPU over the past year has been like fighting a losing battle for most consumers, as they try and outcompete purchase bots and thousands of desperate others for measly supply drops.
Soon, though, the chip shortage began to hit the everyday market. In April 2021, Samsung announced the dwindling supply may begin to start impacting everything from TVs to kitchen appliances. Car production has taken a significant hit, with accounting firm KPMG predicting car manufacturers will lose $100 billion in 2021 alone as vital semiconductors are unattainable for the production of state-of-the-art cars.
But with semiconductor manufacturers making more money than ever, why is the situation so dire?
Firstly, let's cover the obvious. The coronavirus pandemic affected every business in one way or another, and manufacturing took quite a significant hit. Logistics, warehouse and factory operation, and international supply of raw materials all made semiconductor fabrication a difficult task, and depending on the country, lockdowns also played their role. This is not to be understated and was likely a tough situation to navigate for the companies – however, they claim this is not to blame.
In fact, Nvidia (a large graphics card manufacturer and semiconductor gobbler) claimed that there was not a supply issue at all; instead, there is a serious demand issue.
As lockdowns forced people into the confines of their home, employees have begun working remotely at a much-increased rate. According to the Office for National Statistics (ONS), working from home has more than doubled in 2020 compared to 2019 in the UK, as companies (particularly tech) were forced out of offices and into remote working. However, not everyone had a computer capable of handling even office-related tasks and so required a shiny new desktop, while those that had one already saw it as a brilliant justification to upgrade their rig. The computer components market boomed, forcing manufacturers into a frenzy for fabrication space to get semiconductors. Soon, scalpers took over the market, supply became non-existent, and everyone from home PC builders to large corporations became frustrated.
The story doesn’t end there, though. One more large event over the past few years has thrust the industry into turmoil – the cryptocurrency boom.
Chasing the success of bitcoin, riding the ever-increasing wave of Ethereum, and even throwing their life savings into Dogecoin, people around the world have been jumping on the crypto train and riding it until it reaches the Moon – or crashes in a fiery wreck. According to Statista, 6 percent of the US population owns or uses cryptocurrency, with other countries (particularly Nigeria) responding at much higher rates. But the real consumers of semiconductors are the crypto miners. Investing in massive numbers of graphics cards to increase productivity and profit, these miners – whether it be a small rig in the garage or a warehouse full of them – are absolutely swarming the market and grabbing every last ounce of computational power they can.
The issue became so bad that Nvidia has now placed a crypto mining limiter on their products, making them less attractive for mining and hopefully placing them in the hands of other consumers.
Therefore, there is not one reason that semiconductors are in such scarce supply. Intense demand and possible supply issues have combined together to form the perfect storm, one that is now affecting every facet of technology. Unfortunately for everyone, it doesn’t look likely it will end any time soon. Glenn O’Donnell, Vice President and Research Director at Forrester, suggests the "chipageddon" will last until 2023, and others suggest a similar story.
So, dust off the ol’ faithful iPhone 7, take good care of your computer components, and hunker down – it looks like we’re in it for the long haul.