Chip Shortage May Last Longer Than Previously Expected

by ian

Ian Patrick with contributions from Eric Cicale, FISM News


There is growing concern that the chip shortage will be around for an extended period of time, putting more strain on their manufacturers as well as on companies that use chips in their products.

Auto makers in particular are feeling the squeeze of the broken supply chain. This week CEOs from multiple car manufacturers including Volkswagen, Daimler, and Ford Europe expressed their uncertainty of continuing production of their automobiles. Talking to CNBC, the Volkswagen CEO said his company is “relatively weak because of semiconductor shortages.”

The CEO of Daimler told the BBC that the chip-makers assert the lack of semiconductors “will bleed into 2022 from a structural point of view and then gradually get better.”

Reports of car manufacturers having to halt or slow down production have been trickling in the past few weeks. In North America, Ford and General Motors had to halt production in multiple plants due to their inability to meet demand on certain models and the reluctance for customers to purchase cars at higher prices.

The short supply of semiconductors is largely due to a spike in demand over the past few years which production has been unable to meet. Some of the components used to make the chips have been hard to get, even before the 2020 pandemic halted most production and trade. In addition, the emergence in popularity of bitcoin mining as early as 2017 has driven up chip demand and prices.

In the midst of the semiconductor chaos, prominent chip-maker Intel announced that they plan to invest almost $95 billion in boosting their chip capacity and production capabilities. They also plan to open two new chip-making plants in Europe. However. despite Intel’s ability to produce more semiconductors, the price may still stay high to cover the immense cost of such an investment.