- There is a shortage of computer chips which is accelerated by interruptions in the supply chain.
- Car manufacturers rely on technology chips in their cars, and people like Apple need them to power devices.
- With just as many chips to go on, the industries are suffering as they struggle to meet demand.
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A group of lawmakers is asking the government of Biden to intervene in the global shortage of computer chips.
“We believe the incoming government can play a useful role in mitigating the worst effects of the shortage of U.S. workers,” the senators wrote in a letter.
So, what’s going on?
Car manufacturers and consumer electronics companies compete for computer chips
These chips have become an important part of the supply chain.
Car companies like Ford use it to power the modern technology in their vehicles – the engine, Bluetooth capabilities, seating systems, collision detection and blind spot, transmissions, WiFi and video display systems are all used on the chips.
And the silicone components are the driving force behind the high-tech devices from companies like Apple that we use every day. The upgraded technology in game consoles and especially 5G smartphones requires much more power, and therefore relies more on chips than previous generations.
Since March, when the pandemic began, consumer demand for vehicles has risen and for devices such as smartphones and game consoles that people can use for entertainment while sitting at home.
Car manufacturers such as General Motors, Toyota, Ford and Subaru, to name a few, were forced to close factories at the start of the pandemic. When the factories reopened, customers’ demand for cars skyrocketed while people, with stimulus checks in hand, passed the chance for low interest rates and a way around that did not involve mass transportation.
Automakers have responded by increasing production to maximum levels, further increasing demand – and competition – for computer chips.
Read more: Wall Street is concerned that Intel’s disappointing earnings are a sign that the terrible year is only going to get worse: ‘2021 looks like a messy year’.
Meanwhile, players in the chip sector like Intel have already struggled to keep up with demand, even before the pandemic. And disc makers abroad also experienced disruptions in the supply chain because the pandemic forced them to close factories.
Even with disk makers doing quite well during the pandemic, such as Taiwan Semiconductor Manufacturing Company – which manufactures more than half of the world’s computer chips and is also Apple’s primary supplier, there is still not enough stock to go around.
The deficit does not look like it will stop any time soon
Computer chip makers operate at maximum capacity and it is not feasible for businesses to build factories to compensate for the increase in demand, Bloomberg reported.
According to an analyst who spoke with Bloomberg, phone makers like Apple are more willing to pay higher prices for chips than car makers are. However, this does not mean that the disk shortage has had a negative impact on telephone manufacturers. Apple apparently had supply issues for chips to power the 5G-equipped iPhone 12 models that launched in October.
But the automotive industry specifically felt the pinch, and some even had to stop production due to the shortage. Ford and Fiat temporarily stop production because they do not have enough chips.
With not enough chips, the automotive industry could lose $ 61 billion by 2021, according to consulting firm Alix Partners as reported by Bloomberg.