The best Managed Service Provider in Marietta and greater Atlanta GA, predicts the microchip shortage will continue through 2023.
Most common manufactured goods use microchips
The microchip shortage has created a catastrophic supply chain deficit across various manufacturing sectors. Manufacturers affected include smart appliances, office equipment, TVs, smartphones, PCs, MACs, tablets, iPads, servers, electronic toys, and basically, anything with a plug or battery has a chip, including your top IT support company.
However, the most affected are the automotive manufacturing industry and dealers. Automotive manufacturers rely upon hundreds of OEM part manufacturers to make a single car which makes up two-thirds of the production line. These smaller suppliers often don’t have the financial pull to compete for low-supply/high-in-demand microchips. As a result, transportation has taken a huge hit, especially in overpopulated cities like Atlanta.
Reasons for microchip shortage
The microchip shortage was the perfect storm created by the pandemic. The combination of workforce shortage, high demand for electronics, lack of suppliers, trade war, and a significant microchip plant fire led to the most considerable microchip shortage in history.
Covid shutdowns
Covid was the first of many factors that caused the microchip shortage. In addition to worker illness and lockdowns, many industries predicted reduced sales and halted purchasing. While automobile parts manufacturers stopped purchasing, computer manufacturers increased their purchases. Then the automobile industry increased their demand when 0% financing and discounts led to massive sales. The combination halted manufacturing production, and the microchip suppliers can’t keep up with current demand.
Microchip surge
In 2020, more people worked from home than ever before. As a result, their dependency on electronics surged. The top 10 purchasers of microchips were electronic computer companies. For example, Apple and Samsung Electronics were the largest buyers of microchips in 2020. Apple purchased $53.6 billion in microchips, accounting for 11.9% of the global market, while Samsung Electronics spent $36.4 billion. This surge depleted inventory and left manufacturers across the globe scrambling. (Source: Gartner February 2021)
Microchip monopoly
Asia has a monopoly on microchips with 75% of the world-wide market share. The United States only produces 12% of semiconductor manufacturing. The reliance on Asia for new electronic components puts global manufacturing at a considerable disadvantage.
China trade war
In 2020, the US placed restrictions on China’s biggest chip manufacturer, Semiconductor Manufacturer International Corporation (SMIC). As a result, the trade restrictions made it hard for American companies to buy microchips. Because of this, they turned to Taiwan Semiconductor Manufacturing Limited (TSML) and Samsung, already at manufacturing capacity.
2021 Taiwan drought
Not only was the TSML overwhelmed with orders from the China Trade War, and experienced the worst drought in more than half a century. Since they require large amounts of ultra-pure water during the manufacturing process (63,000 gallons a day), they could not keep up with demand.
Japan plant fire
Renesas, a microchip manufacturer in Tokyo, Japan, supplies 30% of the global market for microcontroller chips used in cars. On March 19, 2021, a plant fire halted manufacturing and exasperated the already existing microchip shortage. As of now, Renesas expects a full recovery of shipments in mid-August.
Summary
The microchip shortage is possibly the worst disaster to affect the production of electronics in history. Unfortunately, it is likely not going to be over anytime soon. Experts predict conditions will not improve anytime soon. Likewise, it will worsen if there is a China-Taiwan conflict since Taiwan produces 70% of the microchips globally.
Top IT support company in Atlanta and Marietta
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About the Author
Deborah Frazier is the author of IT Outsourcing Secrets – A Small Business Guide to Compare IT Support Companies. With nearly 20 years of experience consulting small and medium-sized businesses on their IT support needs, she brings a wealth of knowledge to INSI as Head of Marketing and Sales. If you like this article and would like to get notified when a new article is posted, click here.
