Global chip shortage could last months, even years

The Economist magazine published an article titled: The global chip shortage is here for some time.

Due to the lack of chips, Toyota announced on May 18 that it would suspend production at two factories in Japan, becoming another automaker recently forced to reduce production amid a global chip shortage. Companies including Ford, General Motors and Jaguar Land Rover have also had to send workers home temporarily.

The pain of the chip shortage is not limited to the automotive industry. Because the chips in short supply are of various types, from expensive high-tech devices that power smartphones and data centers to simple sensors and microcontrollers, everything from cars to washing machines, and each chip often costs only a few cents. In the past few weeks, companies including Foxconn, Nintendo and Samsung have warned that the chip shortage has hit production, affecting everything from smartphones and game consoles to TVs and home broadband routers.

各国政府对此忧心忡忡。美国在4月召开了一次峰会；5月20日又开了另一次。德国财政部长已致函台湾当局，要求优先考虑汽车制造商。咨询公司Gavekal Research在5发布的一份报告称，芯片短缺可能很快影响到东亚几个经济体的出口表现。但政府部长们几乎无能为力，芯片短缺是新冠疫情大流行与一个以繁荣和萧条周期著称的行业相互作用的结果，可能会持续数月，甚至数年。

“The most important thing [to recognize] is that shortages are a natural part of this industry,” says Malcolm Penn, head of Future Horizons, a chip industry consultancy. Chipmaking, he says, is a good example of what economists call “pork cycle” economics, named after the regular swings between undersupply and oversupply first analyzed in the U.S. pork market in the 1920s. Like hogs, the supply of chips cannot respond quickly to changes in demand. Even before the pandemic, chip capacity was tight, says Penn. Chipmakers’ investments in factory equipment have for years been below their long-term average (see chart).

The pandemic, therefore, came at the worst possible time. After an early crash, demand has rebounded in several sectors, said Alan Pristley of Gartner, another consultancy. Consumers locked down at home bought laptops and other gadgets. Cloud computing operators, big consumers of high-end chips, scrambled to add servers to cope with the wave of working from home. The auto industry was hit particularly hard early in the pandemic, and demand for cars has since recovered. But the complexity of the production process means it takes three to four months to turn raw silicon wafers into a batch of usable chips.

The impact of the pandemic has been made worse by problems in specific industries. A fire in March at a chip plant owned by Japanese company Renesas exacerbated chip shortages in the auto industry. Meanwhile, some chipmakers are facing shortages of their own. Many cheap, common chips are made in old plants designed to process silicon wafers as small as 200mm in diameter. It's hard to increase capacity at these old plants because few equipment makers still make the old machines.

But the pork cycle may be turning. Taiwan Semiconductor Manufacturing Company, the world's largest contract chipmaker, plans to spend $30 billion this year to add capacity. Two other giants, Samsung Electronics and Intel, are spending $28 billion and $20 billion, respectively, on new capacity; second-tier chipmakers are also increasing spending. These investments will ease the chip shortage, but they won't solve the problem immediately. Jim Whitehurst, the boss of computer maker IBM, said the chip shortage could last two years.

Moreover, other experts believe that when the chip shortage eventually ends, chipmakers may find themselves facing a familiar "big" problem: the capacity expansion that has emerged to cope with the current severe shortage is likely to mean a considerable surplus in the future.