Long before the covid19 struck on the planet, worldwide industries were facing the wrath of the trade war between the USA and China. In 2020, the Pandemic worsened the condition of Trades and Industries. One of such industries is the tech industry. This industry manufactures daily life appliances and gadgets. The manufactures stopped for long-haul during a pandemic.
Since then, Manufactures are trying to make a comeback in industries after disrupting production during the pandemic. The supplies of chips and processors used to operate most devices are in short supply. The shortage is being felt acutely in the automotive and Smartphone industry and will continue to last for two years.
Countries like India, the USA, UK, and France have taken note of the shortage and took the matter as a serious, concern. The whole problem aroused due to the concerns over the risks of foreign supplies and data privacy. Recently, President of the USA Joe Biden and Prime Minister of the UK Boris Johnson begged for investments to empower domestic semiconductor industries in hopes of reducing reliance on China. On the other hand, China has laid its new plans to expand chipmaking capacity in response to U.S. technology curbs and continue its domination across the market.
The Chinese Association of Automobile Manufacturers is predicting that industries will be hit by worse shortages during the second quarter but see supplies improving in the fourth quarter as orders return from the market. The average waiting time for one chip shipment in the market is 18 weeks. Earlier waiting time was two weeks before the Trade tussle begins.
The current supply shortage is lasting longer than earlier ones. The pandemic triggered the global chip shortage. Encouraged by dropping sales due to disruptions in the first quarter of 2020, manufacturers slashed business projections and semiconductor orders drastically as there was no workforce to help.
The Recovery that was unexpected by the manufacturers in the the second half of last year left manufacturers and integrated circuit suppliers unprepared, as production failed to catch up with surging demand.
U.S. sanctions on Huawei Technologies, of Chinese origin but the world's largest smartphone makers have led to a principal shift in the global mobile industry and upset the balance between chip demand and supply.
The global chip shortage is pulling up prices of items, such as phones, PCs, Cars, and Smart devices. But the worst hit is Automobile and high-end Smartphone industry.
Price increases are making their way via supplies and crucial materials in chip-making. The production is trying to meet rising demand and close the supply holes. As a result, many of the world's large chip makers like Intel Qualcomm, and MediaTek are raising prices as they still intend to make devices and other gadgets. Industry officials and experts say the increases will continue till 2021 end.
Consumers have started to feel the pinch of the hikes as prices of popular laptops and mobiles have slumped up over the past two months. The same is with other components. For example, the ASUS ROG laptop base version earlier was Rs.49,500. This has jumped to Rs.52,000 this month, according to Keepa, a site that tracks prices.
In current years, the US has imposed a massive number of increasingly stringent sanctions on its rival superpower China due to ideological and trade differences. The official line from the US government has been that this is because chip production in China would mainly increase their military power and strength.
However, because of the inter-dependence in global trade, the USA and many nations rely on China to produce affordable and useful technology. The sanctions have created wide-ranging supply problems.
As the global chip market is benefitting only Asia, The USA and other countries have tried to take matters into their own hands. Production units are getting settled up. But still, they lack the manufacturing capacity to meet the high demand for chips.
To learn from mistakes, and avoid further shortages, UAE based automobile company has warned that automotive companies should now take supply chain production and research into their own hands. “Long-term forecasting, strategic buffering and resolving warning systems, and parts-design for a few tools and techniques can create more active role down the supply tiers across many commodities.” Experts said.
As of 2021, only three firms can manufacture the most advanced Chips and Semiconductors. One is Taiwan Semiconductor Manufacturing Company (TSMC) of Taiwan. The second is Samsung of South Korea and The third is Intel of the United States. The fabrication and capabilities of these chips are based on the number of transistors, the smallest of a chip’s electronic components, per square millimeter.
USA has raised 37 billion dollars for setting up new plants across the USA to tackle the shortage. Meanwhile, in India, Only Samsung has shown interest in setting up more factories to tackle the scarcity.
Although the situation is expected to improve in the coming months or by FY22, production will be resolved. But, it has brought out many concerns and loopholes in front of the industry, over the supply chain at the forefront.
Diversify the supply chains, scaling up production by more units, and maintaining a good buffer are some of the lessons learned by this ongoing crisis. Every problem comes along with an opportunity to learn from past mistakes. And work to ensure a better future, and grow like never before.
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