As the chip shortage continues, companies and governments look for solutions

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Semiconductors have become the centerpiece of modern-day technologies—from IoT products, vehicles, laptops, smartphones and more. The scarcity could continue into 2022 or longer.

Worker creating microchips

Image: Bloomberg/Getty Images

Semiconductors are the backbone of just about everything so many consumers rely on—Internet of Things products, vehicles, laptops, smartphones and even smart washing machines. Now, those chips are in dire supply. 

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By some estimates, making a finished chip can take around 26 weeks—and the rigorous supply chain needed for successfully meeting the demand for them is overloaded. 

How did the chip shortage happen? 

Of course, the ongoing COVID-19 pandemic has been a challenge. There was the massive work-from-home spike, for instance, which in turn resulted in hard-to-handle demands for more laptops and desktops. 

Another problem can be traced to the strain that was put on cloud-based services. The overload of Zoom meetings and video streaming services that hit a spike during the past year. Those services reside in the cloud, and more chips were needed to meet the demand. 

Taken together, several companies began hoarding semiconductors, not knowing what they'd face in the future if COVID carried on indefinitely.   

The semiconductor sector, of course, is one that a slew of employees rely on. According to IBM, the chip industry "employs about 250,000 people and supports more than a million additional jobs in the U.S.

"Unless we boost domestic chip manufacturing, we threaten economic growth and long-term national security," IBM CEO Arvind Krishna said in a recent post.  

SEE: Global chip shortage: Tech sector struggles front and center in company filings (TechRepublic)

Much of the shortage, said the specialty foundry firm GlobalFoundries, specifically comes down to a current scarcity of silicon wafers—the essential material for making semiconductors. A new vehicle today can have hundreds of chips to more than a thousand.    

The bitcoin boom has played a small factor in the ordeal, said The Wall Street Journal, with crypto mining setups needing a large amount of chips to create new BTCs, and miners have stocked up on semiconductors. 

How long will the chip shortage last?

As Daphne Leprince-Ringuet for ZDNet previously reported, most experts believe the chip shortage will last well into 2022. Leprince-Ringuet wrote that "the time it takes to produce a chip could increase by six months, and even up to a year for more specific semiconductors." She added, "Key devices to be impacted will include power management chips, CMOS image and touch sensors, as well as fingerprint sensors and microcontrollers." 

SEE: The new SMB stack (ZDNet/TechRepublic special feature) | Download the free PDF version (TechRepublic)

Meanwhile, the auto industry in the U.S. has been particularly hit hard because of the chip shortage. When the pandemic first started having an impact globally in March 2020, many auto manufacturers shut down production and cancelled orders for semiconductors. But when factories began to open back up, the demand for chips outweighed their availability. According to the Detroit Free Press, many U.S. automakers like Ford and GM have been forced to manufacture automobiles without chips and then place the vehicles on hold for sale until they can install the semiconductors. 

"Our biggest challenge is supply chain, especially microcontroller chips," Elon Musk, Tesla's CEO, claimed on Twitter recently. "Never seen anything like it." He added: "Fear of running out is causing every company to overorder—like the toilet paper shortage [during the height of the COVID pandemic], but at epic scale." 

What's being done to help speed up microchip production?

Even the 2022 date seems a bit of a stretch. Glenn O'Donnell, a vice president and research director at advisory firm Forrester, said in a blog post that the shortage could even continue into 2023

But there's hopeful work being done to rectify the shortage. In February 2021, the board of directors of the Semiconductor Industry Association, which is composed of CEOs and executives at leading U.S. chip manufacturing companies, sent a letter to President Joe Biden. In it, they encouraged his administration and Congress to invest in domestic chip manufacturing and research incentives going forward. 

The federal government seems to have taken the issue seriously. Last week, the Senate passed the U.S. Innovation and Competition Act, an ambitious bill that would provide $250 billion for technological innovations and manufacturing. Within one of its provisions, it allocates $52 billion for funding domestic semiconductor research, design and manufacturing initiatives.  It still needs House approval.

Still, many people knowledgeable about the situation think political assistance can only go so far until the private sector works out its issues. "We believe government should refrain from intervening as industry works to correct the current supply-demand imbalance causing the shortage," said Dan Rosso, the director of communications at SIA. 

"But," he added, the "government can and should strengthen America's semiconductor supply chains over the long term by enacting investments to boost domestic chip production and innovation, so more of the semiconductors needed across the economy and for our national security are made in the USA." 

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