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Here’s how Microchips shortage is disrupting entire industries

07.10.2021
Here’s how Microchips shortage is disrupting entire industries

Microchips are nearly in every electronic machine we know. We use billion of chips in our lives every day. Computers, phones, washing machines, refrigerators, and cars all powered by semiconductors, are now in critically short supply.

The current demand for chips is so great that manufacturers can’t make enough to meet it at this time, meaning consumers all over the world and the MENA region will soon be seeing higher prices for fewer goods.

In an interview with Alhurra TV, ITWORKSME CTO Salloum El Dahdaah explained that the demand for chips has been exceeding supply for the past year as the world shut down because of the COVID-19 pandemic. Demand for laptops, cellphones, and other technological devices drummed up during the global lockdown while many factories closed with it. Millions of employees and students working from home caused demand for personal computers, tablets, and phones to surge to high levels.

 “Governments all over the world are interfering to find solutions for this disruption.  President Joe Biden sought $37 billion in funding for legislation to supercharge chip manufacturing in the United States as the chips shortage has forced U.S. automakers and other manufacturers to cut production. On another hand, the European Union said it wants to boost its share of the global chips market to 20 percent by 2030 while China’s automotive industry was hit hard, as the country relies on imports for 90 percent of semiconductor products.”

He added that almost three mega factories control the lion’s share of chip production worldwide. Several other factories produce semiconductors on smaller scales but they are unable to meet the market mega demand. Apple, for instance, manufacture their own processors but rely heavily on the supply of lower value silicon, such as the chips that are used to drive displays and audio functions.

Asked about the industries affected by the chips crisis, Salloum replied that the shortage is felt the most in the automotive industry. Each produced car needs at least 50 microchips while this number can reach 150 microchips in electric cars. Ford, Jaguar, and General Motors have already limited production and announced temporary plants shut down because of the semiconductor shortage.

“As the demand for chips gets higher, manufacturers are unable to meet it on time, prices are definitely going to be higher for a lot of devices that require a semiconductor,” says Salloum. It is the law of supply and demand. Some reports allegedly pointed that the chip manufacturers themselves orchestrated this crisis to override their huge losses due to COVID pandemic, but such statements are only speculations and could not be confirmed.  Right now, he added, some PC brands witnessed a price hike of 8 to 12% while others reached a 15% price increase. I strongly advise consumers not to invest in new computers or smartphones. These devices' lifespan can reach up to 3 years minimum so it is worth the wait.

Answering a question about Elon Musk, co-founder and CEO of Tesla, saying that the chip shortage will end in a year, El Dahdaah explained that many chip factories in several countries are being built which will increase the production capacity. Plants would need a full year before being able to meet the needed production level. Moreover, many current plants are ramping up their production capacities.

Is there an alternative to these microchips, something to alleviate the demand on them?

“Today, there are no alternatives available. The only solution is to build more factories in several geographical locations. However, monopoly policies and geopolitical controls critically limit such a solution,” Salloum answered.

He ended the interview on the following note: “There is a huge opportunity here for countries in Europe and the Arab world. Countries like Saudi Arabia and UAE have all the ingredients to set up and run such industries”.