BLUF

Microchips are a crucial part of most modern manufacturing and defence technology; the current shortage of microchips shows how dependent we are on these chips.

Summary

Semiconductors (even those that are not hi-tech) have a wide range of uses, including washing machines, cars and phones. Currently, there is a shortage of these chips. The consequences of this are:

  • A shortage of new cars (1.3 million potentially affected) and some other products. 
  • Increased prices for everything that uses microchips.
  • Reduced profits for many companies.

The reasons for the shortage of microchips are:

  • The 2020 COVID-19 induced recession.
  • Changing shopping patterns.
  • Little competition.
  • Weather and a fire closing factories.
  • US government sanctions on Chinese technology companies.

Taiwan Semiconductor Manufacturing Company (TSC) makes about 80% of the microcontroller units used in cars. Due to the complexity of the manufacturing process, TSC might not be able to increase production for at least another three years. China is dependent on Taiwanese made microchips which is a huge strategic issue. The US government has stopped TSC from selling chips that contain US technology to China.  

Learn more about the strategic importance of microchips.

References