Why is there a global chip shortage and why should you care?

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From delayed car deliveries to a supply shortfall in home appliances to costlier smartphones, businesses and consumers across the globe are facing ...

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LONDON: From delayed car deliveries to a supply shortfall in home appliances to costlier smartphones, businesses and consumers across the globe are facing the brunt of an unprecedented shortage in semiconductor microchips.

With every company that uses chips in production panic buying to shore up stocks, the shortage has squeezed capacity and driven up costs of even the cheapest components of nearly all microchips, increasing prices of final products.Automobiles have become increasingly dependent on chips - for everything from computer management of engines for better fuel economy to driver-assistance features such as emergency breaking.

IHS said a fire at a Japanese chip-making factory owned by Renesas Electronics, which accounts for 30 per cent of the global market for microcontroller units used in cars, has worsened the situation.Severe winter weather in Texas has also forced Samsung Electronics, NXP Semiconductors and Infineon to shut down factories temporarily. Infineon and NXP are major automotive chip suppliers, and analysts expect the disruptions to add to the shortfalls in the ailing sector.

US semiconductor companies account for 47 per cent of global chip sales, but only 12 per cent of global manufacturing is done in the United States.Factories that produce wafers cost tens of billions of dollars to build, and expanding their capacity can take up to a year for testing and qualifying complex tools.

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