What Is the Global Chip Shortage?
Are you wondering why there is a chip shortage? Watch this video to learn more.
Automakers decided to cancel chip orders during 1Q20 and 2Q20 because of pessimistic demand prospects due to COVID-19. This “freed up” wafer capacity at foundries and IDMs were quickly filled with orders from consumer electronics companies as demand in this sector skyrocketed.
When automotive demand increased sooner than expected, car manufacturers quickly ran out of chips because of their just-in-time supply chain model, which generally tries to avoid inventories. This situation only worked to worsen the global chip shortage.
Front-end and back-end manufacturing rely on hundreds of different chemicals and materials. The lack of one type of chemical can have a domino effect throughout the entire value chain and can interrupt the whole manufacturing process.
In short, there were many causes of the global chip shortage. From the beginning, some Chinese companies began stockpiling chips out of concerns with US foreign policy and relations. Then when the pandemic began and brought with it a shift to working from home, demand for consumer electronics and server hardware increased substantially.