SKILLECTRONICS - Global Chip Shortage

Global Chip Shortage

By Amey Ajgar

17/10/2021

With increasing demand for new and faster technologies demand for faster and cheaper chips is also increasing worldwide. And this ongoing 2020-21 chip shortage has shown us our dependency over these black semiconductors. From cars to phones chips play a very important role in functioning of various systems inside these devices which make them one of the most important factors of production in these devices. In this blog let us understand the factors that affect chip production, reason and solution this chip shortage and opportunities for India and its allies.

Chip Production

Chip manufacturing is a very time consuming and expensive process. There are hundreds of processes and factors involved in chip manufacturing. Chip designing is the first step where transistors and gates are designed so that it gives a desired output. In designing process different types of simulations and testing are done which makes the design ready for production.

The production of these chips is done in a clean room. This clean room is a specialized place for chip manufacturing. The cleanroom air is 10,00 times cleaner then outside air and workers working inside clean room must wear a special clean room suit to maintain the hygiene. In the manufacturing process of chip, electronic circuits with components such as transistors are formed on the surface of a silicon crystal wafer. A thin film layer that will form the wiring, transistors and other components is deposited on the wafer (deposition). The thin film is coated

with photoresist. The circuit pattern of the photomask (reticle) is then projected onto the photoresist using Photolithography technology. The developed photoresist is used as a mask for etching to process the thin film into the shape of the wiring and other components. With this, one layer of the circuit is formed. The transistors are formed on the lowest layer. Similar process is then repeated, and many layers of circuits are formed on top of one another.

Reasons For Chip Shortage

There are several reasons behind the global chip shortage.

The first reason is supply chain disruption due to Covid-19 Pandamic and Due to global lockdowns, chip production facilities were shut down, leading to the depletion of stocks. Due to the COVID-19 pandemic, more people had to stay at home and upgrade their electronic devices, such as webcams, monitors and computers in order to work from home and be entertained. The demand for chips was increasing but production at the same time was limited.

The second reason is China–United States trade war. In 2020, the United States government placed restrictions on Semiconductor Manufacturing International Corporation (SMIC), China's biggest chip manufacturer, which made it harder for them to sell to companies with American ties. These restrictions forced companies to use other manufacturing plants like Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Samsung. However, these companies were already producing at maximum capacity. This was also a main reason behind behind the shortage because the production capacity of the whole industry is getting affected because of these restrictions.

And the main reason according to me is Taiwan drought. Taiwan is the leader of the global semiconductor industry, with TSMC alone accounting for more than 50% of the global market in 2020. TSMC's facilities used more than 63,000 tons of water a day. In 2021, Taiwan experienced its worst drought in more than half a century, leading to problems among chip manufacturers that use large amounts of ultra-pure water to clean their factories and wafers. This slowed down the production and is one of the main reasons for this global chip shortage.

Impact of global chip shortage

This global chip shortage has affected more than 169 industries and has led to major shortages and queues amongst consumers for graphics cards, video game consoles, cars, and other products that require semiconductors.

South Korean tech giant Samsung said last week that the chip shortage is hitting television and appliance production, while LG admitted the shortage is a risk.

The automotive sector, which relies on chips for everything from the computer management of engines to driver assistance systems, is still the hardest hit. Companies like Ford, Volkswagen and Jaguar Land Rover have shut down factories, laid off workers and slashed vehicle production.

Author- Amey Ajgar (CEO And Founder Skillectronics)

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