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2020–2023 global chip shortage

The 2020–2023 global chip shortage was a worldwide chip shortage affecting more than 169 industries.[1] The crisis led to major price increases, long queues, and reselling among consumers and manufacturers for automobiles, graphics cards, video game consoles, computers, household appliances, and other consumer electronics that require integrated circuits (commonly called "chips").[2][3][4]

For broader coverage of this topic, see Chip shortage.

From early 2020, the effects of and the mitigation of the COVID-19 pandemic caused disruptions in supply chains and logistics which, coupled with a 13% increase in global demand for PCs owing to some countries' shift to a stay-at-home economy,[5] impacted the availability of key chips necessary for the manufacturing of a broad swathe of electronics.[6] The pandemic's impact on the manufacture of semiconductors in South Korea and Taiwan was cited as a cause for the shortage, with constrained supply impacting industries as broad as console gaming and the automotive industry.[7][8]


In February 2021, market analysts IHS Markit were cited by the BBC as forecasting the impact of the dearth to last through to the third quarter of 2021; lead times on chip supply at this time had already extended to 15 weeks, the longest lead time since 2017.[8] By April 2021, lead times for semiconductors from Broadcom Inc. had "extended to 22.2 weeks, up from 12.2 weeks in February 2020".[8]


Severe weather events including the droughts in Taiwan during the summer of 2021 could also be a significant contributing factor. The droughts threatened to affect the production due to the lack of available ultrapure water that is needed to clean the factories and wafers.[9][10]


At the end of Quarter 1 of 2021, used car prices in some countries were increasing due to the demand from both economic recovery, as well as the chip shortage. The price of some cars increased as much as 10% in Q1.[11] By 2023, the automotive industry largely recovered with global car production up 3%.[12][13] In the same year, the global chip shortage had mostly subsided.[14]

Reactions[edit]

Governments[edit]

On February 24, 2021, U.S. President Joe Biden signed an executive order trying to address the chip shortage by reviewing options to strengthen the semiconductor supply chain.[84] Later in April, CEOs of major technology companies and U.S. government officials attended a virtual summit with the White House to talk about improving the resilience of the semiconductor supply chain.[85] In a virtual meeting on September 23, 2021, which followed another meeting in May, the White House pressed automakers, chip manufacturers and others to provide information on the ongoing crisis that has forced cuts to U.S. automobile production, and to take the lead in helping solve it.[86]


On September 15, 2021, President of the European Commission Ursula von der Leyen trailed a forthcoming European Chips Act in her State of the Union address.[87] It was announced that the European Union will use legislation to push for greater resilience and sovereignty in regional semiconductor supply chains.[88]


In December 2021, India outlined a plan to boost its chip manufacturing base.[89]


US Congress passed the CHIPS Act in summer 2022 and on August 9, 2022, President Biden signed the bill into law.[90][91][92] The bill is focused on domestic manufacturing, research and national security, providing $52 billion in subsidies and tax credits for companies that manufacture chips in the United States. It also includes $200 billion for new manufacturing initiatives and scientific research.[93][94][95]


In January 2023, the U.S., Japan, and the Netherlands reached an agreement to limit certain advanced chip exports to China.[96]


In March 2023, the Japanese government intends to impose restrictions on the export of computer chip-making equipment. This move follows similar actions previously taken by the Netherlands and the US. It is expected to take effect in July 2023. However, Yasutoshi Nishimura, Japanese trade minister, emphasized that this plan is not related to that of the US's move. This restriction will impact 23 types of tools used in semiconductor production, ranging from immersion lithography machines to silicon wafer cleaners. Moreover, among the major technology businesses to be affected are Nikon and Tokyo Electron.[33]

Companies[edit]

On July 22, 2021, Intel CEO Pat Gelsinger said he expects the chip shortage will get worse in the second half of 2021 and that it will be a year or two before supplies return to normal.[62] On August 19, 2021, Jensen Huang, CEO of Nvidia, said he expects the shortage to continue well into 2022,[97] while AMD CEO Lisa Su said on September 27, 2021, that the shortage would improve throughout the second half of 2022, though she warned that supply would remain tight until then.[98] However, IBM CEO Arvind Krishna said on October 11 that any prediction of a resolution to the chip shortage by the end of 2022 is optimistic, and that he sees it "more likely" that the issue will not be fully solved until 2023 or 2024.[99]


On September 24, 2021, Taiwan's TSMC said it is actively supporting and working with all stakeholders to overcome the global chip crisis, after its participation at the White House virtual meeting on September 23.[100] Earlier in April 2021, TSMC announced that it plans to invest US$100 billion over the next three years to increase capacity at its plants,[101] days after Intel announced a US$20 billion plan to expand its advanced chip making capacity in Arizona.[102] Already in May 2020, TSMC announced its US$12 billion plan to build and operate a semiconductor fab in Arizona, their second manufacturing site in the United States.[103] Construction is underway as of June 2021, with chip production targeted to begin in 2024.[104] In December 2022, TSMC announced it would triple its investment in its Arizona plants to a total of $40 billion.[105]


On September 20, 2021, the CEO of U.S. automaker General Motors, Mary Barra, said that the chip shortage has forced a supply chain rethink. Barra said that the company will source more semiconductors directly from chip manufacturers instead of suppliers to adapt to the ongoing global chip shortage.[106]


ASML Holding, the largest supplier for the semiconductor industry and the sole supplier of extreme ultraviolet lithography photolithography machines to produce the most advanced computer chips, has been profiting from the chip shortage.[107]


On November 9, 2021, TSMC announced a partnership deal with Sony (Sony Semiconductor Solutions Corporation) for a new $7 billion chip factory in Kumamoto, Japan.[108][109][110] The plant will produce 22-nanometer and 28-nanometer chips to address strong global demand for specialty chip technologies. The factory began construction in 2022 and is expected to be operational by 2024.[111][112]


On November 29, 2021, Nissan CEO, Makoto Uchida, told the BBC it was too early to say when normal deliveries of microchips, and therefore finished cars, would resume.[113]


On January 17, 2023, ABB chairman Peter Voser told CNBC that he believes the worst of the chip supply crunch has subsided and added that slowing growth has helped balance out supply and demand.[114]