What is behind the shortage of semiconductor chips?

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General Motors announced this week that production of its main electric vehicle, the Chevy Bolt, will be halted until mid-October due to a shortage of batteries due to the global shortage of semiconductor chips.

Marketplace has covered the chip shortage over and over again. But why exactly is there a shortage of chips in the first place?

Shortages arise when the demand for something is greater than the supply. When it comes to computer chips, there are issues on both sides of this equation.

First, during the pandemic, the demand for chips increased.

“The consumption of chips has skyrocketed because more and more people are buying computers and various electronic devices because they are stuck at home,” said Morris cohen, who teaches operations and information management at Wharton School.

Then there is a supply problem. It’s because of natural disasters in at least three countries, according to Wheaton Art at Cornell University ILR School.

“So one of the major chip suppliers in Japan had a fire. Texas, for Intel, had a problem with winter storms. And in Taiwan, which is one of the biggest producers in the world of these chips, they’re going through a drought – and making computer chips takes a lot of water, so they’ve been affected, ”Wheaton said.

In addition, companies that make chips have failed to find enough workers. Not to mention the shipping bottlenecks.

“Many of them pass through China as one of the main ports. And they had a COVID outbreak, which prevented people from unloading and loading these container ships, ”Wheaton said. “And then when you have a backlog of those, it’s hard to offload them and catch up, especially if you have a labor shortage. “

While these issues have besieged the chip industry as a whole, for the auto industry there is another issue: Automakers expected demand to slow during the pandemic, so they canceled a big deal. part of their chip orders. This means that now they are at the back of the pack.


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