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Current Affairs

Tackling chip shortage

Date: 23 November 2021 Tags: Miscellaneous

Issue

Black Friday, the biggest shopping season of the year will be severely impacted due to the chip shortages for electronic goods.

 

Background

Chip supply chain was severely impacted during the pandemic. Companies could not cater to the growing demands from multiple sectors.

 

Details

Experts believe that the supply chain constraints could improve by the middle of next year when companies can cater to the needs.

 

Semiconductor chip shortage

  • Semiconductor shortages are a reality. Many industries are forced to wait a bit longer or pay higher for availing the chips.

  • Goods and devices such as smartphones, gaming consoles, personal computer, medical devices, automobiles etc have been severely affected.

 

Affected companies

Apple is said to have lost $6 billion due to chip shortages. Gaming giant Nintendo expects the situation to remain same for the next few days.

 

Reasons for shortage

  • The use of integrated circuits in products is increasing continuously. During pandemic, the consumption of goods came to a standstill.

  • In addition, the manufacturing supply chain stalled for a large period. As product manufactured increased, chip supply could not cope up with the speed.

  • Automobile manufacturing suspension forced chip makers to divert their capacity for electronic device chip manufacturing.

  • The manufacturing of smartphone and PC chips is time consuming. To finish these orders and getting back for other devices will take time.

 

Challenges involved

  • Chip manufacturing requires continuous supply of clean water, electricity and highly skilled workers.

  • The investment required is very high and the risks are more than other industries. It requires support from government if chip manufacturing should succeed.

 

Chip manufacturing in India

  • Indian government previously did not take chip manufacturing seriously. In recent times, the government has announced incentives for chip manufacturing.

  • Tata Group has announced its intention of entering semiconductor manufacturing process. ISRO and DRDO have chip foundry in India.

 

Global politics

  • USA was once the leader of chip manufacturing but now the industry is dominated by Taiwan and South Korea. USA is aiming to get back the crown.

  • The over-reliance on Taiwan will surely affect US adversely in case of clash between China and Taiwan.