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Chip shortage: a new gold rush?

We hardly notice it anymore, but technology has become an integral part of our daily life. At work, at home or while we are out for a ride we are always in contact with the mobile phone, television, computer and probably with a myriad of other electronic devices which, among other things, share the same characteristic: the presence of a chip, considered a bit like the "brain" of these instruments.

Most chips are in fact groups of circuits that run software, manipulate data, and control the functions of electronic devices. The arrangement of these circuits gives them a specific purpose. The chips, however, are made up of dozens (sometimes even hundreds) of layers of materials; these are deposited, then partially removed, to form complex three-dimensional structures that connect all the tiny transistors. In addition, some of these layers are as thin as an atom, an engineering marvel that almost seems to come straight from science fiction.

Unfortunately, in the last year there has been a strong shortage of these chips and this risks affecting millions of people around the world, especially in the poorest areas. While Covid-19 has certainly played an important role, it has actually only worsened a situation that has threatened to harden for years. The lack of these components, in fact, was primarily caused by the exponential growth in demand, although not followed by an increase in global production.

Initially, the problem seemed to be only a temporary delay in supplies, caused by the closure of factories during the first months of the pandemic. However, although production has practically returned to normal, the supply of the chips continues to be limited. Car manufacturers investing more and more in high-tech electric vehicles, the boom in sales of home TVs and computers, also caused by a change in habits that occurred during the lockdown, as well as the launch of new game consoles and mobile phones enabled for 5G. These are just some of the factors that have caused this surge in demand.

Even the mighty Apple - a $2 trillion company and the world's largest semiconductor buyer -, for about $60 billion a year, was forced to delay the launch of the much-acclaimed iPhone 12 by two months, precisely because of the lack of these components.

How is it possible that the problem has not yet been solved? Why are we just not making chips anymore?

In reality it's not that simple, as it can take years to build semiconductor fabrication facilities and several billions to maintain them, a luxury that not many states and/or companies can afford. There are three big names in the sector: Intel, Samsung and TSMC; they account for most of the world's chip production and their factories are among the most advanced, costing more than $20 billion each. Additionally, this year, TSMC will spend up to $28 billion on new plants and equipment alone. If we were to compare this titanic investment with the US government's attempt to pass a law to support domestic chip manufacturing - which would only offer $50 billion over five years - we can see why it is difficult for new companies to enter and especially stay in this area.

These companies (Intel, Samsung and TSMC) generated nearly the same revenue in 2020 as the next 12 largest chip makers combined, while maintaining a near-monopoly on raw materials and the know-how needed to produce the chips. What is more, the economy is so brutal that producers could lose out heavily if they are unable to keep up with the competition; former Intel Corp. CEO, Craig Barrett, called microprocessors the most complicated devices ever made by man.

This is the reason why the various countries face such difficulty in meeting the demand for semiconductors at the national level, so much so that it is rapidly turning into a real "gold rush" of the 21st century. China has established that achieving chip self-sufficiency will indeed be a top national priority in its latest five-year plan, while US President Joe Biden has vowed to build an efficient and secure supply chain, thereby promoting domestic manufacturing. The European Union is also considering various measures to produce its own chips, but success is far from assured.

Unfortunately, if the situation were to remain unchanged, it is also realistic to think that in the coming months we could see a general increase in the prices of all those devices that use these microprocessors. The consequences of the shortage of these fundamental components could therefore hit consumers hard, at a time when the economic and financial crisis caused by the pandemic has already caused billions of dollars in losses in private savings, and millions of new unemployed.

Translated by Veronica Giustiniani


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  • L'Autore

    Stefano Cavallari

    IT: Nato a Gallarate, in provincia di Varese, ha conseguito la maturità linguistica ed è attualmente laureando in Scienze Politiche e delle Relazioni Internazionali, a Milano. Parla quattro lingue, ama viaggiare ed ha origini sudamericane, un “cocktail” esplosivo che sin da subito ha generato in lui una forte passione per la diplomazia e la politica estera, con un focus particolare sul Sud America, per ovvie ragioni, ma anche su Nord Africa e Medio Oriente.

    La sua qualità migliore? Non si ferma mai, c’è sempre qualcosa da imparare, che sia dai propri errori o da chi ci sta di fronte. Tra gli interessi, inoltre, figurano il campo economico e l’innovazione tecnologica, fattori che hanno giocato un ruolo importante per la sua maturazione all’interno dell’Associazione.

    In Mondo Internazionale infatti ricopre rispettivamente le cariche di Referente di Tesoreria ed autore per l'area Tecnologia e Innovazione, incarichi che gli permettono di unire tutte le sue passioni e cercare di dare sempre il massimo per l'Associazione.

    EN: Born in Gallarate, in the province of Varese, he obtained a linguistic high school diploma and is currently majoring in Political Sciences and International Relations, in Milan. He speaks four languages, loves to travel and has South American origins, an explosive "cocktail" that immediately generated in him a strong passion for diplomacy and foreign policy, with a particular focus on South America, for obvious reasons, but also on North Africa and the Middle East.

    His best quality? He never stops, there is always something to learn, whether it is from one's mistakes or from those in front of us. Furthermore, his interests include the economic field and technological innovation, factors that have played an important role in his maturation within the Association.

    In fact, in Mondo Internazionale he holds the positions of Treasury Referent and author for the Technology and Innovation area, positions that allow him to combine all his passions and always try to give his best for the Association.

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