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Prateek Suri on how COVID-19 led to $60 billion global chip shortage for tech industry

Friday, April 23rd, 2021 14:55 | By

Maser CEO and founder Mr. Prateek Suri has come out to explain how COVID-19 pandemic has heavily affected global tech industry, with focus on microchip – the core brain for artificial intelligence business.  The shortage is estimated to be worth a whopping $60 billion in less than one year.

In 2020, many industries experienced manufacturing decline or came to complete halt in production due to the pandemic, and handful of companies that produce the silicon semiconductor chips were no exception.

“The situation caused intense strain in shipping due to the WHO health protocols and government restrictions put in place to contain and reduce the virus from spreading, “Suri says.

“Demand for electronics soared as consumers tried to make their new work-from-home lifestyles palatable by bingeing on monitors, laptops and entertainment devices. This surge in sales left many companies scrambling to meet the new demand.

"As a result, brands placed significant larger orders creating an acute shortage worldwide for the precious chip. Right now, chip companies are under pressure to meet current market demand since they are behind time in meeting these escalating orders, “he elaborates.

With this in mind, it’s clear that microchips are very important tools in people’s lives. Most gadgets have the chips integrated, and chances are you’re using something with a chip right now.

It also goes without saying that there’s a huge demand for artificial intelligence chip equipment. The modern chip, features an ever-smaller transistors measured by their width in nanometers. (It takes 25.4 million nanometers to equal an inch.) In general, the smaller the nanometer number, the smarter and faster the chip is and more expensive and difficult it is to make.

For clarity, Mr Suri has explained what exactly a microchip is. “The microchip, or the integrated circuit is the nervous system that controls just about every electronic device in the world. Used in computers, smart TVs, smart watches, mobile phones, home electronics, satellites, aircrafts, motor vehicles, washing machine, microwaves, iPods, hearing aids, the internet, GPS tracking devices, identification cards, refrigerators, vacuum cleaners, medicine and so much more.”  

In 1958, Texas Instruments engineer Jack Kilby invented the first integrated circuit, an invention that would go on to define today’s modern technology in becoming the modern-day microchip.

With its introduction, it was possible to make more complex and faster electronic devices. Without a doubt, chips have radically altered and revolutionized the market industry. Minus the chip, Maserwouldn’t be in existence.

To a great extent, the chip shortage has been a ticking time bomb that has started causing disruption in supply of both the automotive and electronic gadgets. The shortage has wreaked havoc in the automotive industry which rides on a complex and very tight production procedure with the Just-in-Time manufacturing process.

Almost similar to the way the semiconductor business is built-to-order. Which means, they order for supplies and components when they need them ahead of time. Consequently, when the automakers stopped production in February, 2020.

They correspondingly cancelled their orders anticipating that the pandemic would end soon, just like everybody else expected. Only for the pandemic to drag for months. In unexpected cases like these, the industry is in a quagmire since most of them do not order in bulk.

Chip shortages are expected to wipe out $61 billion of 2021 sales for automakers alone. Currently as we speak the industry has no supplier. Crisis is already looming in the motor industry as some of the auto industries have shut down their enterprise due to the chip shortage.

On 8th February 2021, General Motors decided to close three of their companies. Soon after, Toyota Motor, Nissan Motor Co Ltd, Volkswagen, Ford, Honda, and Fiat Chrysler Automobiles followed suit, shutting down production on certain models.

The heat is also being felt in the mobile phone companies as well. As companies are increasingly launching new 5G smart phones, handsets requiring two to four times more power management chips. Owing to the complexity of the wireless technology, they are also facing a major setback in production. As some models may be out of stock, harder to find, or more expensive than they used to due to the current chip crisis.

“The chip discussion is a very serious subject since the tech and motor industries as a whole depend on it for its functionality and operations. Currently, there is an overwhelmingly huge consumer demand for electronic gadgets as the pandemic has pushed the world further to the digital realm.

Given the unprecedented mix of factors the world has gone through in 2020 and the current ongoing supply constraints. We are optimistic and confident about improving and meeting the current demand since we had the advantage of having the chip stock in surplus to weather us during this unpredictable year,” Suri added.

With much of the world’s electronic industry heavily depending on existing factories based in Taiwan. One Taiwanese company, Taiwan Semiconductor Manufacturing Company (TSMC), which is the world’s largest semiconductor manufacturer produces 70% of the global auto industry’s supply of a key chip called the microcontroller. Our fate is now left to China, the United States and EU who are battling for supremacy in building the latest artificial chips to quench the current global crisis in the tech industry, experts predict that the crisis may loom for a while longer since building chip factories is a hugely expensive business and can take roughly 2 years before it starts operation. Mr. Prateek Suri doesn’t see a quick or simple resolution of how production will catch up with demand.

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