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Explanatory. Hungry for more chips in a technologically hungry world

SAN RAMON, CA. (AP) – As the US economy recovers from its epidemic decline, vital dental care is declining. Computer chips that power a wide range of products that connect, transport, and entertain us in an increasingly dependent world. technology:

The deficit has been pouring into various markets since last summer. Schools have struggled to buy enough notebooks to learn from home, delayed the release of popular products such as the iPhone 12, and created crazy clutter to find the latest video game consoles, such as the PlayStation 5.

But in recent weeks, things have gotten worse, especially in the auto industry, where factories are shutting down because there are not many chips to complete the construction of vehicles that are starting to look like wheeled computers. The problem was recently exacerbated by an underground container ship that blocked the Suez Canal for almost a week, drowning chips from Asia to Europe.

On Thursday, General Motors and Ford announced that they would cut production at their North American plants in the future as the global shortage of semiconductors appears to be widening.

These entanglements are likely to frustrate consumers who can’t find the vehicle they want, and sometimes end up with a low-end model solution without such fancy electronic features. And that threatens to hit the auto industry hard, with some estimates losing $ 60 billion in sales in the first half of the year.

“We’ve been hit by a perfect storm, and it won’t go away any time soon,” said Baird technology analyst Ted Mortonson, who said he had not seen such a serious shortfall in the chip industry for nearly 30 years.



The epidemic has prompted chip mills to close early last year, particularly abroad, where most of the manufacturers are producing. When they started reopening, they had orders to make additions.

It would not be so discouraging if the chipmakers did not leave unforeseen demand at that time. For example, no one entered 2020 expecting to see an increase in PC sales after almost a decade of steady decline. But that came after government blockades forced millions of office workers to work from home while students mostly attended classes in absentia.



Yes, Sony և Microsoft were planning to release the next generation of video game consoles, respectively, for their PlayStation և Xbox brands, which required more sophisticated chips than ever before. To increase demand, wireless service providers are demanding chips to power the world’s fastest 5G services.

President Donald Trump’s trade war with China probably did not help either. Some analysts believe that the Trump administration’s inclusion of Huawei Technologies in the blacklist pushed the major smartphone maker to create a huge stockpile of chips because it was ready for pressure.



Home-made orders boosted consumer electronics sales by squeezing auto parts suppliers who use computer chips to adjust gas pedals, gearboxes, and touch screens. Chipmakers have stepped up pressure by redeploying factory lines to better serve the consumer electronics market, which brings them much more revenue than cars.

After an eight-week outbreak in the spring, automakers began reopening their plants earlier than planned. But then the unexpected news happened to them. Chipmakers have been unable to quickly turn the switch և to prepare the types of processors needed for cars.



They canceled the shifts and temporarily closed the factories. It seems that Ford, General Motors, Fiat Chrysler (now Stellantis), Volkswagen and Honda have suffered the most. Others, especially Toyota, are not as drastic. This is probably because Toyota was better prepared to know how sudden, sudden shocks could disrupt supply chains following the massive earthquake and tsunami that struck Japan in 2011 in Japan.

Bigger carmakers have shifted their chips from slow-moving models to high-demand ones, such as pickup trucks and large SUVs. Ford, GM և Stellantis have started to build vehicles without some computers, storing them with plans to repair them later.

GM expects the chip shortfall to cost up to $ 2 billion in pre-tax profits this year from lost production. Ford is preparing for such a blow. Chipmakers are unlikely to fully meet demand from the auto industry by July at the earliest.



Expect to pay more. The stock of many models was scarce even before the shortage of chips, as automakers struggled to make up for lost production due to the epidemic.

The IHS Markit estimates that the chip shortfall from January to March reduced North American auto production by about 100,000 vehicles. In January of last year, before the epidemic, the US car industry had enough vehicles to meet the 77-day demand. In February 2021, it decreased by almost 30% to 55 days.



Samsung Electronics, one of the world’s largest chipmakers, recently warned that its huge range of consumer electronics could be affected by the shortage. Without specifying which products could be affected, Samsung CEO Koh Dong-jin told shareholders that a “serious imbalance” in chip supply and demand could hurt sales from April to June.



There are no quick fixes, but chips makers seem to be preparing for future challenges.

Intel, which has dominated the computer chip market for decades, recently made a big splash by announcing plans to invest $ 20 billion in two new plants in Arizona. More importantly, Intel has announced that it is launching a new division that will sign contracts to make custom chips for companies other than its own processors. This is a big departure for Intel, bringing it closer to a model already popular with Taiwan Semiconductor Manufacturing Co. or TSMC, which was already building a plant in Arizona.

Driven by the current shortfall, TSMC is committed to spending $ 100 billion over the next three years to expand its global chip manufacturing capabilities. The $ 28 billion investment will come this year to boost production in factories that have not been able to keep up with demand since the epidemic began, said CC Wei, TSMC CEO.

And President Joe Biden’s $ 2 trillion US infrastructure upgrade plan envisions $ 50 billion to help the country become less dependent on overseas chips. The US market share in the global chip market fell by 37% in 1990 to 12% today, according to the Semiconductor Industry Association.

But the chips will not start coming out of any new factory built within two or three years as part of a cost-cutting process. And even as existing plants grow and expand to meet current demand, some analysts are wondering if there could be a backlog of processors in a year.


Krisher reported from Detroit.


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