The economic crisis has had a significant negative impact on the semiconductor manufacturing industry. This article will analyze how the semiconductors crisis influenced various economic sectors and business spheres.
What is the semiconductors crisis?
Today, any business exists in a global market environment. On the one hand, it creates opportunities to expand partnerships and customer base and increase profits. But, on the other hand, it threatens to increase the number of risks for each company. After all, the more influence factors, the larger they are – the more dangers lurk in the company.
It was especially noticeable during the global crisis, the COVID-19 pandemic, which affected all business areas, from market conditions to people’s shopping habits. One of the most significant problems that have negatively affected the business involved in all stages of product creation and existence: production, transportation, sales to final consumption, is the shortage of chips, which began in 2020.
Due to the global nature of the geographical activity and a vast network of partners in different countries, including electronics, technology, and automotive, the logistics industry has suffered significant losses since the chip shortage. Difficulties have also been exacerbated by quarantine restrictions, border closures, port suspensions, and the container crisis.
Today, almost every digital electronic device is powered by semiconductors that contain silicon and are critical to building microchips. For example, cars use chips for both simple – digital displays and entertainment systems and more complex functions, such as emergency braking. Semiconductor chips are also components of home appliances and gadgets.
The following factors caused the greatest influence:
- limited production,
- its break due to pandemic and quarantine,
- growing demand for electronics.
There are very few companies in the world that specialize in semiconductors. This is due to the complexity of the process, the need for significant investment, the latest equipment, and the best professionals. The leading chips manufacturers are only a few large companies: Taiwan’s TSMC, Korea’s Samsung, US tech giants Intel, Micron, GlobalFoundries, and Taiwan’s UMC. In addition, the shortage problem is exacerbated by the fact that some chipmakers do not have their production and place orders based on other companies.
How did the crisis affected the market?
The semiconductors crisis has already negatively affected manufacturers, starting with the electronics sector and ending with the automotive industry and the manufacture of household appliances. Periodic shutdowns of production lines have often led to disruptions in supply chains and forced to create of stocks of components in warehouses of manufacturers and finished products from sellers. According to preliminary forecasts, logistics will remain feverish for a long time until semiconductor manufacturers flood the world market with them.
Due to the shortage of chips and, as a result, the decline in production of products that require these components, logistics companies have suffered significant losses. The crisis has caused global supply chain disruptions. Companies that specialize in car transportation, or those in which this segment accounts for a significant share, have suffered the most. The closure of ports only exacerbated the losses of carriers – huge batches of new cars were forced to return to the manufacturers’ warehouses.
In May 2021, the volume of shipments was 5% lower than before the pandemic. In addition, according to Clarksons, the supply of new cars from January to July was 9% lower than in the same period in 2019. There is also a negative trend to reduce the volume of automotive logistics further.
However, it should be noted that the electronics market is automated, and in response to the shortage, which has arisen, albeit slowly, come alternative chips, display arrays, and other components.