This is how the vicious circle of unstoppable semiconductor shortages occurs.

The semiconductor industry is at the forefront of technological advances. So why can't we produce enough chips to move the world?

Two years have passed since the turmoil caused by the pandemic of the new coronavirus, and the serious shortage of computer chips, which are the heart of countless products such as smartphones and notebook PCs, has caused a serious shortage of the entire world economy. It continues to influence manufacturers.

In recent months, automakers have been forced to suspend production due to a shortage of automobile production and a decline in sales. The chip shortage is also affecting industries related to game consoles, network equipment, medical equipment, and so on. In October, Apple cited a chip shortage as the cause of the poor performance, and Intel warned that the chip shortage is likely to continue until 2023.

In short, the semiconductor supply chain is expanding, and the way it expands is new, deep-rooted, and difficult to solve. Demand for basic chips, which are particularly widespread, is rapidly increasing beyond the pace that chip makers can handle. Demand for such chips fluctuates greatly, and investment risk is high.

Brian Matas, Vice President of Market Research at IC Insights, which is researching the semiconductor industry, said: "It's amazing how long it took for the supply chain to recover after the global economy stagnated during the Coronavirus Disease (COVID-19)."

Unexpected expansion of demand

One of the reasons is that demand is expanding unexpectedly. In 2020, when COVID-19 began to transform its business, the chip industry was already expecting a turnaround. Global chip sales in 2019 are down 12%, according to the American Semiconductor Industry Association. However, the group predicted in December 2019 that it would increase by 5.9% in 2020 and 6.3% in 2021.

Looking at the latest figures, sales increased by 29.7% between August 2020 and August 2009. In addition to technologies such as cloud computing and 5G, the demand is driven by semiconductor chips, which are being used in all products from automobiles to home appliances.

On the other hand, due to sanctions imposed by the United States on Chinese companies such as Huawei, a major manufacturer of smartphones and network equipment, some Chinese companies are hoarding as many chips as possible. I started.

According to David Yoffie, a professor at Harvard Business School and a board member at Intel, the surge in demand for high-tech products triggered by the boredom of remote work and lockdown, and the shift to e-commerce. It was an unexpected event for many.

According to Yoffie, chip makers weren't aware of the sustained increase in demand until about a year ago. But chipmakers can't steer suddenly. Building a new factory can cost billions of dollars, and building and equipping it can take years. “It takes about two years to build a new factory, and the factory is getting bigger, more expensive, and more complicated,” says Yoffie.

Not enough simple IC

Under these circumstances, Sony and Taiwan Stacked Circuit Manufacturing (TSMC), the world's largest contract manufacturer of chips, announced that they will invest $ 7 billion to build a factory that can produce old-fashioned chips, but chip production has started 24. It will be the end of the year. Intel has also invested in the construction of some state-of-the-art factories, but they have been in operation for 24 years.