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Chip shortage: causes, impacts and future outlook

The global chip shortage that erupted during the covid-19 disease pandemic posed a major problem for the entire semiconductor industry. The demand for electronics skyrocketed at that time as people started to work from home in large numbers and seek entertainment through various electronic devices. This naturally led to a greater demand for semiconductors.

chip shortage

Causes of chip shortages

Several factors contributed to the chip shortage. First of all, the pandemic has severely disrupted global supply chains - factory closures and transport restrictions have negatively impacted both semiconductor production and the supply of necessary raw materials.

In addition, it should be mentioned that chip production is extremely costly and requires long-term planning over a number of years. Already before the pandemic broke out, production capacity was almost completely exhausted. There was therefore virtually no flexibility to react in time to the surge in demand.

The impact of shortages on the economy

The situation described above resulted in a severe global chip shortage with negative impacts on a wide range of industries. The automotive industry, which is totally dependent on the supply of electronic components, has of course been the most affected. As a result, car manufacturers have had to cut production in some cases.

However, the chip shortage has also affected the consumer electronics sector. Delivery times for a number of products were significantly extended, which was again felt negatively, especially by end customers.

Efforts to find solutions

In order to strengthen competitiveness in the global semiconductor industry, both the European Union and the United States have come up with legislative packages to promote domestic chip manufacturing (the European Chip Act and the US CHIPS Act), both of which envisage, among other things, significant investments in manufacturing capacity, semiconductor R&D or the promotion of private-public cooperation.

In addition, the US CHIPS Act introduces new restrictions on the export of advanced technologies to China, which only exacerbates tensions between the two powers.

Outlook for the future

However, despite legislative efforts by the European Union and the US, problems in global supply chains still largely persist. While demand for chips continues to grow, manufacturers have not yet been able to increase production capacity at the same pace.

The situation is further complicated by the fact that there is a general shortage of skilled workers in the technical sectors. It therefore takes companies a very long time to fill vacant positions of technicians or engineers.

Nevertheless, a slight improvement is expected for 2024. Both governments and private companies are investing in expanding production capacity, diversifying supply chains and creating a more stable environment across the semiconductor industry. Together, this could at least partially address the problems caused by chip shortages.

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