It’s plain simple what happens when these little chips are down
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Almost every market has been, and is still being affected by the global pandemic, one obviously is the food market, perhaps because everyone has to eat to remain sustained and develop, or because it’s required for survival or pleasure. Either ways, the impact of the pandemic on the food market has been felt globally. One market that has also been gravely affected, not by the pandemic alone but also by some other natural and artificial disasters, is the microchip market.
Uneven is the scale of equilibrium in life and nature. More so, in this market, as the demand for microchips rise, the supply is still limited. Many companies have further expanded their investment by building factories, consolidated by government efforts too in this doing. Notwithstanding, it will take a while for this act to meet with the current demand, and by that time, demand would be expected to have also increased as is the trend now.
Samuel Taylor Coleridge once said, “water, water everywhere, not a drop to drink.” In this context, one may wonder why chips are scarce in the first place, noting that they are made from silica which is gotten from sand. The raw material may be readily found, however, as a manufactured item, it requires many complexes whose foundries or factories are found in concentrated places on earth. No sole country fully manufactures and supplies its own chain of chip market.
Statistics provided by Semiconductor Industry Association (SIA) estimate sales to have risen from 5.1% to 8.4%. Considering that this is a multi-million-dollar industry, the change is magnanimous. These changes are not driven directly by individuals, they are however affected by the change in taste or human desire from older technology in cars to more smart cars that require loads and loads of chips, and also in the want of in-house gadgets away from the previous outdoor conventions. As a result of working and schooling from home, the demand for game consoles, smartphones and laptops skyrocketed; might be wondering why there has been shortage of the newly launched PS 5 console, it all started from this. The trade war has further exacerbated the scarcity, while other factors include drought in the part of world like Taiwan (where such industries are largely based) and adverse weather.
The nitty-gritty of the microchip is it relevance. As of today, almost every electronic gadget is made of microchips. Chip shortage is a cause for concern because unlike the past where the demand and supply fluctuated based on underlying market situations, this time it is long-term, led by an aggravated appetite for home-entertainment gadgets like TVs, tablets and game consoles. Some experts have predicted this to last a year, or maybe or a bit longer. This will not only take out many firms of industry who solely depend on products like this, but it will also spike up the cost production. Some companies such as Toyota and Honda are ready to capitalise on the shortage, and have forecasted massive revenues, laying claims to abundant stockpile to last this period. Many blue-chip companies have resorted to hoarding to control their already depleting stockpile, hereby, creating artificial scarcity. This will, in fact, cause a marginal increase in prices of gadgets and especially those considered as a luxury item.
The miniature size of the chips has given them the name micro, but in use, it is on a macro level, and as it is used get more pronounced in everything, it should be called an omnichip.