The Semiconductor Chip Shortage: What Caused It and When Will It End?

semiconductor chip shortage
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What do a fire in Japan, freezes in Texas, and droughts in Taiwan have in common? Other than adding to the strangeness of last year, they all happen to have directly affected a global semiconductor chip shortage.

On their own, and even combined, these events are only contributing factors. There’s a larger issue within the industry and how the global supply chain works in general.

What are the largest factors to this semiconductor chip crisis, and how can we solve this shortage of semiconductor chips?

Keep reading to see what solutions for chip production various industries are looking toward.

What Is a Semiconductor Chip Anyway?

A semiconductor is a material that isn’t an insulator but also isn’t a conductor. It is a hybrid material that depending on the environment and situation can act as both. Silicon plays this role very well, which is why it’s so common in the semiconductor chip industry.

There are two types of semiconductors that take advantage of the same technologies in photovoltaic cells. Metallic single-crystal silicon wafers and monocrystalline silicon wafers are the same things. They’re made the same way for both industries.

The two types of semiconductors created are the N-type semiconductor and P-type semiconductor.

The N-type of semiconductor is intentionally doped with an impurity. These are impurities like phosphorus, arsenic, bismuth, or antimony. These impurities are pentavalent atoms — atoms with five electrons in their outer shell.

P-type semiconductors get doped with trivalent atoms like aluminum or boron.

These impurities enhance the desired capabilities and create electron holes. These holes get exploited to allow the flow of electrons from the sun, in the case of PV cells. In the case of the computer, electrons get pushed into the system from an outside source — a power cable, for instance.

In a semiconductor chip, the physical geometry of the chip gets modified to create patterns. These patterns create logical functions. Functions such as addition, subtraction, and multiplication.

These logic chips are CPUs, GPUs, DPUs, and so on that perform logic functions.

Memory chips store information temporarily or permanently. Temporary storage is fast to read and write, but as soon as current flows stop, the data is lost. Permanent storage means (relatively) slow reading and writing.

This forms the basis for DRAM (Dynamic Random Access Memory) and NAND Flash (USB thumb drives and SSD technology) chips.

Who’s Affected by the Semiconductor Chip Shortage?

Can you think of a device, appliance, or even physical ID card that doesn’t contain transistors?

Today our cars, trucks, airplanes, phones, passports, credit cards, pencils and pens, radios, TVs, blenders, refrigerators, coffee machines, and even lightbulbs get packed with semiconductors.

Ultimately, it isn’t one industry or person who’s affected. We’re all affected deeply by this global semiconductor chip shortage, whether we know it or not. These effects will linger for years and deeply scar certain industries for a decade.

Even outsourced tech support companies are on high alert to combat the chip crisis.

The Automotive Industry

Renesas makes about one-third of the microcontroller semiconductor chips that carmakers use. On March 19, nearly the same time countries around the world were imposing lockdowns due to the COVID-19 pandemic, Renesas had a fire.

This impacted their manufacturing capacity and contaminated their ultra-sensitive cleanroom operation. Months later, they were near 100% production speed. But the impact of losing 3.9 million units is an estimated $110 billion loss to the automotive and transportation industry.

Combined with the lockdowns and plant shutdowns for GM, Ford, and others, they were forced to renege on semiconductor orders. Not only automotive manufacturing, but also practically every manufacturing industry took this same hit.


Because of just-in-time supply chain practices.

Those semiconductor chips and companies were diverted elsewhere.

Since automotive chips use legacy technologies, it’s difficult for chipmakers to change gears quickly. After their pivot, they’re less engaged in helping out the automotive market. Rather, they prefer to focus on more profitable markets and give automotive companies attention when it’s better for them.

This has put automotive companies at the back of the line in terms of demand and priority.

IoT Devices, Edge Networks, and Cloud Computing

IoT stands for the internet of things. This internet of things includes all of the devices in our homes outside of traditional data points like PCs and phones. These are all those appliances we mentioned before and even more.

You can wirelessly control and connect to your doorbell, security system, thermostat, TV, and more at the tap of a finger. A shortage of semiconductors means that companies may not iterate their products, and choose to go with what they have on hand.

Usually, this is because they have two scenarios going on. Newer products mean newer chips and almost always mean more of them.

All of these devices need controls and servers nearby, at the edge of the network where the devices physically reside. These servers are called “edge” networks and help to handle the load locally where they can.

Most data for analysis and other more permanent or back-end tasks get moved further into the bowels of the network via cloud computing. Another growing trend is “fog” computing, which acts as a bridge between cloud networks and the outside world.

All of these devices and servers need the latest chips and chipmaking processes. Only cloud computing on its own is expected to grow by nearly one-quarter (23.1%) during 2021.

This is an unprecedented growth rate, pushed beyond its natural growth rate by the new work-from-home paradigm. New 5G data pipelines also need the latest chips and enable these IoT services to get connected.

All of these technologies emerging and working together at once would stress the industry by itself. Not to mention all the other things that 2020 through 2021 has brought.

Smartphones, Tablets, PCs, and Gaming Consoles

Smartphones are getting faster and tablets are getting more powerful. iPad Pro and Surface users are starting to edge out the notebook market, except where a little more power is needed.

Gaming laptops and ultrabooks are serving business professionals and software developers. Desktop computing generally remains the realm of extreme gamers and creative professionals.

Likewise, gaming consoles have custom-made chips that are different than consumer-grade electronics. Ones such as the Playstation series of consoles are extremely popular, with millions of units sold per year.

The release of the Playstation 5 console was difficult for the entire global semiconductor chip shortage.

One part of the issue is also the various types of chips that smartphones, consoles, and high-end PCs or laptops contain. More on that coming up.

The long and short of it is that those producers couldn’t make quite as many varieties of computers as their consumers are used to. There are only a limited amount of chips available for any specific task, and therefore only a limited amount of options.

Imagine you go to buy a car and you’re used to there being five or six trims available, but there are only three. Oh, by the way, there are only three colors available in each trim, too.

It’s no wonder that Apple and others said that their color and other options are limited this year, compared to other years. Not to mention their hopes for expanding options into a wider array.

Cryptocurrency Miners and ASICs

Cryptocurrency mining, Bitcoin and Ethereum, in particular, add even more pressure to the mix. Let’s do a quick overview of why this is the case.

Not only is there a supply chain breakdown, but an upswing in price surges demand in GPUs and ASIC chips. ASIC chips are “application-specific integrated circuits,” such as WiFi chips or some other chip designed to do only one task and to do it well.

Mining cryptocurrencies involves trying SHA-256 or other encryption methods time after time. This is a brute-force search for the right key to unlock the nonce of the block they’re mining.

There’s a specific algorithm that dictates the way the encryption works. You can create a chip that calculates only the encryption algorithm that Bitcoin uses to give those miners an edge. This is different than a CPU that performs basic calculations for general purpose applications.

GPUs are very handy for physicists, video games, and for general arithmetic for various blockchains. Their aptitude for mathematics makes them ideal for jumping from one blockchain to another, such as Ethereum, Monero, Litecoin, Ethereum Classic, and others.

Jumping from one blockchain to another usually gets decided by which is most profitable at that particular moment. To complicate matters, you also have to decide how many you can mine before an automatic difficulty adjustment gets made.

If this is over your head, don’t worry. It’s still over the heads of most people in the SEC, FTC, and several other multinational government organizations, too. If you need to get a bit more of a backstory, check here for more about how a blockchain works.

When Will the Semiconductor Chip Shortage End?

Supply-chain problems prevent shipments from going through the world due to a lack of shipping containers out of China and other Asian countries. That’s right, there’s a massive shipping container shortage.

Container ships are sitting off the coast of countless ports, stuck due to the pandemic and related procedures. Rail cars are thus held up in the states with empty containers waiting to be shipped out.

The only reason they’re empty (along with practically every US store’s shelves) is that there are no products coming through customs to make the assemblies that will be shipped back out to the rest of the world. There’s an additional shortage of truck drivers to send those products across the US.

Until these problems due to the pandemic can get resolution, shipping of any kind, including semiconductor chips, is going to be slow-going and pricey.

That being said, new factories are getting made around the world as we speak. Elon Musk believes that the shortage will end soon. But it isn’t as simple as a few new factories, even if they cost upwards of $10 billion per factory.

Indeed, Intel, one of the foremost chip designers and fabricators says it will cost the world at least a two-year chip shortage.

How to Cope Through the Shortage Until the End

We might as well face it: we live in a world that depends on semiconductors. For an industry that deals in tens of billions of dollars per month in sales, mere moments of downtime are critical.

This is compounded all the more as the weeks, months, and even years drag on. It’s always a gamble, for these industries, if the $10 billion investment in a new factory with new technologies will pay off.

Since it may take four months for their product to come into the market, there may be a better technology around the corner that performs better. Now there are 3D gates and all kinds of possibilities opened up to chip designers.

The best way to cope: live with what you can and don’t expect beyond what you can’t live with.

Everyone is suffering and whining about it won’t fix anything. If multibillion-dollar companies can’t solve the problem overnight, no one can. But they’re trying their best to solve the problem as quickly and painlessly as possible.

The Semiconductor Chip Shortage: Under Control?

The semiconductor chip shortage may last for some time longer. Some estimate a few months while others estimate a few years.

No doubt, there will be certain industries that feel the pinch more than others. This is why it’s critical to do the best with what you have and the technologies at hand.

Moore’s law has lulled us into a moment of expecting ever-better results, while not taking into account the human condition. In very binary and computer terms, the solution may seem simple and carefree, the reality is far from this.

Be Structured Technology Group is far from a mindless, soulless company hoping to turn a profit. We pride ourselves on our personal connection with our clients, fellows, and partners. We are a local IT support company that has served Los Angeles area business for three decades.

Contact Be Structured today to see the difference that a personal touch in your managed IT, security, cloud computing, hardware and software, and other needs can achieve.

About Chad Lauterbach

CEO at Be Structured Technology Group, Inc. a Los Angeles based provider of Managed IT Services for small business. I desire to help small businesses better utilize technology by assisting in high level planning to make sure that new systems will benefit them both operationally and financially. I am careful to implement and support systems using industry best practices.