2020–2023 global chip shortage
Between 2020 and 2023, there was a worldwide chip shortage affecting more than 169 industries, which led to major price increases, long queues, and reselling among consumers and manufacturers for automobiles, graphics cards, video game consoles, computers, household appliances, and other consumer electronics that require integrated circuits.
From early 2020, the effects of and the mitigation of the COVID-19 pandemic caused disruptions in supply chains and logistics which, coupled with a 13% increase in global demand for PCs owing to some countries' shift to a stay-at-home economy, impacted the availability of key chips necessary for the manufacturing of a broad range of electronics. The pandemic's impact on the manufacture of semiconductors in South Korea and Taiwan was cited as a cause for the shortage, with constrained supply impacting industries as broad as console gaming and the automotive industry.
In February 2021, market analysts IHS Markit were cited by the BBC as forecasting the impact of the dearth to last through to the third quarter of 2021; lead times on chip supply at this time had already extended to 15 weeks, the longest lead time since 2017. By April 2021, lead times for semiconductors from Broadcom Inc. had "extended to 22.2 weeks, up from 12.2 weeks in February 2020".
Severe weather events including the droughts in Taiwan during the summer of 2021 could also be a significant contributing factor. The droughts threatened to affect the production due to the lack of available ultrapure water that is needed to clean the factories and wafers.
At the end of Quarter 1 of 2021, used car prices in some countries were increasing due to the demand from both economic recovery, as well as the chip shortage. The price of some cars increased as much as 10% in Q1. By 2023, the automotive industry largely recovered with global car production up 3%. In the same year, the global chip shortage had mostly subsided.
Causes
The global chip crisis was due to a combination of different events described as a perfect storm with the snowball effect of the COVID-19 pandemic being the primary reason for accelerating shortages. Another contributing factor was that demand is so great that existing production capacity is unable to keep up. Other causes have been attributed to the China–United States trade war and the 2021 drought in Taiwan.COVID-19 pandemic
An increase in remote work and remote learning caused a surge in demand for computers, network peripherals, and other consumer electronics with chips. Due to lockdowns, chip production facilities were shut down, leading to the depletion of inventories. In the fourth quarter of 2020, traditional computer sales saw a 26.1% growth over the previous year.China–United States trade war
In September 2020, as part of the economic conflict between China and the United States, the US Department of Commerce imposed restrictions on China's largest chip manufacturer, Semiconductor Manufacturing International Corporation, 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 and Samsung. However, these companies were already producing at maximum capacity.In 2020, GlobalFoundries, a U.S.-based chipmaker and AMD's semiconductor manufacturing arm before its IPO, ceased operations at its only Chinese plant. The fab was supposed to produce 300 mm wafers, but the 65,000-square-meter factory in Beijing never began production.
In October 2022, the United States announced they would introduce further measures in restricting sales of computer chip technology to Chinese companies, primarily affecting sales of advanced chips necessary for cutting-edge technologies. As a result, the shares of major Asian chipmaker companies slumped during the reopening of stock markets in Taiwan, Japan, and South Korea after public holidays.
In October 2022, Washington mandated that companies using US software or hardware must obtain licenses before exporting chips to China. This is regardless of their country of origin. The US also urged Japan and the Netherlands to implement similar regulations.
Cryptocurrency
The increased use of proof-of-work cryptocurrencies led to a large amount of mining, done primarily with general-purpose graphics processing units. The high demand for GPUs for cryptocurrency mining reduced their availability for other uses.Severe weather
A severe winter storm in February 2021 forced the closure of three plants in Austin, Texas, owned by Samsung, Infineon, and NXP Semiconductors, due to loss of electricity. This set back supply from these plants by several months.Taiwan is the leader of the global semiconductor industry, with TSMC alone accounting for more than 50% of the global wafer foundry market in 2020. 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. For example, TSMC's facilities used more than 63,000 tons of water a day, more than 10% of the supply of two local reservoirs.
Fires at facilities
An Asahi Kasei semiconductor plant which specializes in ADC and DAC components caught fire in October 2020. Another Japanese factory owned by Renesas Electronics, which supplies 30% of the global market for microcontroller units used in cars, caught fire in March 2021; Renesas said it would take at least 100 days for them to get back to normal production. In January 2022, a fire from the Berlin plant of ASML affected the production of EUV lithography equipment used in chip production.Russia–Ukraine war
The price of neon, a noble gas needed for lasers in chip manufacture, increased sixfold between December 2021 and March 2022 due to the COVID-19 pandemic and war in Ukraine. The supply of neon was severely constrained by the Russian invasion of Ukraine, sparking fears that the conflict could worsen the chip shortage. Ukraine produces about half of the global neon supply as a byproduct of the Russian steel industry, and 90% of the semiconductor-grade neon used in the United States. Semiconductor manufacturers have searched for alternative suppliers, such as noble-gas manufacturers in China, but any new supplier would take at least nine months to increase production. The supply of krypton and xenon, of which Ukraine is also a major exporter, was affected as well.Russia exports about 40% of the global supply of the metal palladium, used in certain chip components, and the supply of palladium could be affected by trade sanctions imposed by Western governments.
Impacted industries
According to an analysis by Goldman Sachs, at least 169 industries have been impacted by the global chip shortage, with the automotive and consumer electronics industries among the most affected by the crisis.Cars
The average modern car can have between 1,400 and 1,500 chips, some even up to 3,000. Cars account for 15% of global chip consumption, while personal electronics account for around 50%. Chip revenues are even more skewed towards non-automotive sectors. The chip shortage was expected to cost the global automotive industry US$210 billion in revenue in 2021, 2.5m more automobiles were sold in 2021 vs 2020. As of 2024, automotive units sold had not recovered to pre-pandemic levels. Despite lower sales, some manufacturers increased profits over 2020, as Toyota and General Motors, for example, saw record profits for 2021, due to resilient demand and decreased financial incentives offered to buyers.At the start of the pandemic, car manufacturers incorrectly predicted that sales would drop, canceled chip orders, and were unprepared to meet demand. Chip manufacturers had more commitments from the IT sector, which reduced capacity for car chips. Ford parked thousands of unfinished vehicles at Kentucky Speedway as the company waited for chips to finish assembling those cars. Toyota planned to cut vehicle production worldwide by 40% in September 2021, while General Motors announced it would halt production of almost all cars at its North American plants for a week or two that same month. During the third quarter of 2021, there were only two-thirds as many new car sales in the United States as there had been during the same time period in 2020, as supply could not meet demand. Opel closed its Eisenach manufacturing plant until 2022 because of the shortage, causing 1,300 workers to be temporarily laid off. In mid-2022 Automotive manufacturing corporation Stellantis paused production at two plants in France claiming a lack of semiconductors.
Desktop computers and graphics cards
The availability of virtually all components required to build a desktop computer has been greatly impacted by the global chip shortage. The two main manufacturers of CPU chips, AMD and Intel, have struggled to keep up with the rising demand of their products as a result of the global pandemic. Furthermore, the global chip shortage has made it difficult to acquire graphics cards, with the availability of new and used graphics processing unit cards being further worsened by an increase in cryptocurrency mining in 2021. Furthermore, AMD and Nvidia, the leading manufacturers of GPU cards, both released new models of their flagship cards during the pandemic; these newer models were in extremely high demand, and rarely found in stock. Furthermore, scalpers often utilize Internet bots to automatically buy out a retailer's stock in a matter of seconds. These cards are then resold with the price marked up to 300% above the manufacturer's suggested retail price.However, pricing for GPUs has begun to go back to MSRP due to Ether undergoing a consensus mechanism change dubbed "The Merge", which changed it from proof-of-work to the more efficient proof-of-stake around 15 September 2022. This, combined with the release of 40-series Nvidia GPUs, alongside decreasing cryptomining profitability as the coin prices plummeted, resulted in cryptominers offloading their used cards to the market.