What Caused the Shortage?

The shortage has been caused by a perfect storm of contributing factors. Pandemic-related work stoppages, increased demands and failing logistics all had a hand in the silicon shortage. One of the biggest contributing factors was the auto industry misjudging demand for vehicle manufacturing, putting pressure on the chip manufacturers who pivoted to focus on producing consumer goods to satiate the masses who were stuck at home, increasing the demand for entertainment and technology during the height of the pandemic.

The drought in Taiwan, where 2/3rds of the manufacture of semiconductors occurs, will draw the shortages out. Massive quantities of water are needed to produce semiconductors and chips. The typhoon season usually replenishes Taiwan’s water stores, but the frequency of typhoons has been dwindling over the last decade, culminating in drought this past year.

What Shortages Mean for Consumers

Your favorite brands won’t go under, but you’ll need to be a patient and flexible shopper. Release dates will be delayed, older products may no longer be sold, and it may be a while before you can get your hands on that shiny new gaming console. TVs will be more expensive and newer car purchase may have to be put on the back burner.

The Upside

Intel just announced that it will be funneling $20 billion into the creation of two new chip plants based in Arizona. TSMC is also expanding its chip plants in Arizona. As expansions begin for the competing companies, hopes are that the shortages will only last a few years. If you play the stock market, it’s time to snag up some shares in chip manufacturing. You will see a payoff as the big corporations begin to expand and pick up steam.

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