Why the global chip shortage won’t end soon

The news of the global chip shortage has been so far-reaching this year that it has become a meme. “Sorry I forgot to wash the dishes, there is a potato chip shortage worldwide.” But as with many online jokes, there is a grain of truth in it. The crisis in the semiconductor chips is real and has had a serious impact on our lives. Cars are more expensive and harder to build. Computer manufacturers are rushing to keep up with the insatiable consumer demand for remote work and school equipment. And countless products have been delayed, with release dates pushing like dominoes into 2021 and beyond.

While it’s a problem that affects just about everyone, the chip shortage is particularly painful for gamers. A year after the PlayStation 5’s launch, it’s still practically impossible to order one. (At least, not without paying an exorbitant price hike, or following stock bots like a machine.) And PC players itching to upgrade their GPUs, already accustomed to dwindling hardware supplies and skyrocketing prices, will have to live with their old video. cards a little longer.

As Glenn O’Donnell of Forrester Analytics tells Engadget, the problem is usually a simple supply and demand problem. There are several reasons for this: Automakers cut their hardware orders at the start of the pandemic, assuming consumers wouldn’t be interested in buying new vehicles. It turns out the opposite was true – overwhelming demand has driven up used car prices significantly. Chipmakers were also forced to keep up with rising demand for PCs, game consoles and a wide range of gadgets, while also dealing with production delays amid COVID lockdowns and other precautions.

Aaron Souppouris/Engadget

“I’d like to say things have improved, but they’ve actually gotten a bit worse, and I’m not surprised,” O’Donnell said in a recent interview with Engadget. In April, he argued that the global chip shortage would persist into 2022 and into 2023. Now he’s even more convinced that we won’t see major relief until then. While future chip factories from Intel, TSMC and Samsung could increase inventories, it will be at least another two years from when those companies are grounded and operational. Intel began construction on its two chip plants in Arizona in September and expects to have them operational by 2024.

In short, get used to the chip shortage, because we will suffer from it for a while. In an interview with Nikkei last week, Intel CEO Pat Gelsinger also confirmed that he expects the situation to last until 2023. “COVID disrupted supply chains, making it negative,” he said at a press event in Malaysia, where the company is investing $7.1 billion in manufacturing and packaging lines. “Demand exploded to 20 percent year-over-year and disrupted supply chains created a very large gap … and that exploding demand continues.”

NVIDIA CEO Jensen Huang echoed that sentiment in a recent interview with Yahoo Finance, saying he doesn’t think there are “magic bullets” when it comes to dealing with the supply chain. Huang also noted that NVIDIA’s own group of suppliers is multi-sourced and diverse, so the shortage shouldn’t dramatically impact new product development. But NVIDIA also struggled to meet the demands of gamers before the pandemic. Scalpers and cryptominers typically bought up all available inventory, leaving the average consumer with a limited amount of inventory from stores and resellers.

While Huang expects production to pick up again in 2023, he also believes the pandemic-driven pressure to buy more computers and gaming hardware will persist. “I think these are permanent conditions, and we’ll see new computers build for a long time to come,” he told Yahoo. “People are building home offices and you could see all the implications.”

In the US, there is a glimmer of hope that the Innovation and Competition Act (USICA), which includes $52 billion in funding for the CHIPs for America Act, could provide an incentive for more semiconductor manufacturing. But after passing the Senate earlier this year, legislation has stalled in the House of Representatives, where Republican members said they would block USICA. The bill also includes $190 billion for improving U.S. semiconductor R&D, all in hopes of becoming more competitive with China, which has dramatically increased chip production over the past decade.

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