How The Global Computer Chip Shortage Happened

it's not an overstatement to say that semiconductors power the modern world they're not only a key component of nearly every electronic device we buy and use they also power the factories that make the electronic devices we buy and use they power our laptops our cell phones our cars our washing machines our refrigerators yeah even our refrigerators and this is just the stuff in our home we're not even getting into all the way semiconductors are important to the military and to the power grid if software is eating the world then the chips are the teeth and now there aren't enough of them getting made a massive global shortage and it's getting so bad that general motors one of the world's largest automakers said it could lose up to two billion dollars because the semiconductor chip shortage forced it to temporarily shut down some auto manufacturing plants president joe biden just ordered economic and national security experts to look for gaps in the semiconductor supply chain in the united states they want to see how reliant the us has become on other countries to manufacture semiconductors here's how the global chip shortage got so bad and what's being done to fix it so what are semiconductors it's silicon with with uh transistors built into it and these circuits are put into basically any product these days that needs power generally uh every every single electronic product these days has has these chips in them that allow them to do what they do when people talk about semiconductors now they're talking about the advanced microchips that power smartphones computers and cars and advanced medical equipment and the analog semiconductor devices that power radios and thermostats the transistor a kind of semiconductor was first successfully demonstrated in 1947 at bell labs in new jersey its inventors won the nobel prize for physics created the first tech companies in silicon valley and basically laid the foundation for the modern digital world after the transistor came the integrated circuit the microprocessor etc etc until the super small super advanced ships we have today now the semiconductor industry is massive within the industry there are semiconductor companies that design the chips called fabulous companies and there are companies that manufacture them called foundries there are also integrated device manufacturers like intel that both design and manufacture chips more and more though major semiconductor companies are adopting the fabulous model and contracting out orders to foundries like taiwan semiconductor or samsung and that trend toward fabulous has helped complicate the chip shortage we've all been hearing about the us chip industry has captured 47 percent of the global market share in sales but only 12 in chip manufacturing according to the semiconductor industry association so how did this all start well covet 19. the coronavirus pandemic forced people to work from home to go to school from home to just basically do everything from home people upgraded their computers they got smart speakers tricked out their home theaters and played a lot of video games businesses scrambled to set up remote work systems and needed more cloud infrastructure so what became very clear is that electronics companies you know just there was a supply chain disruption but once that kind of started working its way through in the summer and china started getting back to work like surprise companies needed knew that they needed to increase production by a lot there's no sign that the demand is slowing for semiconductors global semiconductor sales totaled 439 billion dollars in 2020 and that's an increase of 6.5 compared to the 2019 total of 412.3 billion dollars according to the semiconductor industry association global sales for the month of december 2020 were 39.2 billion dollars an increase of 8.3 compared to the december 2019 total another big reason for the shortage cars are getting more advanced and they need more semiconductors in fact right now it's the auto industry that's feeling the squeeze in computer chips most acutely cars not only need advanced chips to run increasingly complicated in-vehicle computer systems they also need older less advanced semiconductors for things like power steering the auto shortages are happening because the auto oems canceled all their orders in the midst of covid last year and it just takes the supply chains um a while to adjust uh we've had some some whip saws so that would be happening is it's not really the semi-guy's fault it's the auto supply chain but to the extent that the shortages themselves are sort of focusing attention and jumpstarting the debate on what we should be doing in terms of semiconductor manufacturing in the us i think that actually is where the discussion can be useful analysts expect the chip shortage to persist well into 2021. we are in a real difficult situation of course we've heard from the likes of amd's like lisa sue and others about the expectation of this lasting about six months so a hundred days if if her interpretation is right is gonna put us nearly all the way out well over halfway into that six month period and i really do wonder are we able to shorten this delay at all with any action that can be taken right now i think the biden administration really needs to focus on how do we not allow this to happen again semiconductors have been so essential to nearly every single industry the chip shortage has forced the white house to take steps to shore up the chip supply chain in the united states we need to stop playing catch-up after the supply chain crisis hit we need to prevent the supply same crisis from hitting in the first place and in some cases building resilience will mean increasing our production of certain types of elements here at home and others will mean working more closely with our trusted friends and partners nations that share our values so that our supply chains can't be used against us as leverage the bond administration is not going to lump everything together in one giant bundle and then negotiate that and geopolitically with china they're going to look at what's national security what's economic security there's a close link between the two let's focus on what's more important most most important you see the biden administration doing it with uh with the supply chain uh and with and with the semiconductor industry and let's focus on how to address risk how to have independent testing um and but fundamentally the this administration is going to work multilaterally with our allies to try to figure out how do we work all these things together to make sure we're safer and i'm heartened to see that the united states is going to not just block countries companies they're going to make america more competitive in industry such as the semiconductor industry and that's how we're going to maintain and grow our lead over china in terms of technology innovation at the semiconductor companies executives say they'll be able to ramp up production to end the shortfall but that likely won't happen until later in 2021 after the immediate shortages get resolved the demand for semiconductors is only supposed to increase new 5g telecom networks need smartphones with 5g enabled chips the so-called internet of things will put chips into more and more everyday devices and the remote work brought on by kovan 19 appears here to stay china is attempting to become self-sufficient when it comes to semiconductor chips right now it imports most of its semiconductors you know beijing has always had big ambitions to have its own home-grown industry but the u.s restrictions not only on sales to china for chips but also especially on a telecoms giant huawei that has really acted as a stimulus for the industry so beijing has made chips a top priority for its next five-year plan which is going to be unveiled in march independence is one of five quote fundamentals of china's economic development and 1.4 trillion dollars has been earmarked to develop the semiconductor industry by 2025 with a goal to have 70 percent of chips used in china made in china i think 19 a lot of people in in the business world start to really look at our supply chains uh because of coba 19 and you know we it's no secret that the electronics manufacturing is kind of based in china right but what people kind of don't know is that the number one pure ship factory in the world is in taiwan that's tsmc now taiwan's taiwan has not had the trade issues that china has but it's still an island off the coast of china so there was a lot of discussion early in the pandemic last year that we we have to look at the stuff from a geopolitical standpoint because you know if the military can't make a jet uh because they don't have chips and then taiwan is caught in a geopolitical dispute a lot of people just said we need the ability to make leading node ships here in the united states you

Channel: CNBC

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Keywords: CNBC, business, news, finance stock, stock market, news channel, news station, breaking news, finance news, money, money tips, financial news, Stock market news, stocks, us news, world news, cable news, computer chips, semiconductors, technology, global chip shortage, cars, general motors, playstation, phones, laptops

Id: sfAyXjRFUJk

Length: 9min 26sec (566 seconds)

Published: Fri Feb 26 2021

Reddit Comments

[u/Grisbyus]

Yes, need some up to date fabs on America's side of the hemisphere. Global auto production, etc. should not be contingent on Asia's whim and mercy.

[u/Evilbred]

Honestly CNBC has been killing it during 2020/2021 with their Youtube videos. I always look forward to their well produced and very informative stuff.

[u/cp5184]

TLDW: covid caused demand spike and car cos cancelled orders then reissued orders causing delays

[u/hackenclaw]

I never thought I needed a laptop so soon when my dual core i7 haswell is "sufficient" because I rarely use that. Now with WFH, I actually needed a proper laptop lol

[u/ViolettaJones]

Any idea when the shortage will end?