Who Will Make the Chips?

In 2020, the COVID-19 pandemic rocked the world in more ways than one. It forced businesses to shutter, people to retreat to their homes, and entire industries to pivot. One of the industries hit hardest by the pandemic was global chip manufacturing. As countries went into lockdown, the supply chain for semiconductors was disrupted, exacerbating an already volatile situation. As the world slowly begins to edge out of the pandemic, the question on everyone's mind is - who will make the chips?

The Global Chip Manufacturing Landscape

The semiconductor industry is one of the most critical sectors for global technological advancement. From AI to smartphones, semiconductors are the backbone of modern technology. However, manufacturing such complex chips is not an easy business. It involves intricate manufacturing processes that require specialized materials, advanced machinery, and skilled labor. The industry is also capital-intensive, requiring significant investments in infrastructure and R&D. As a result, it is dominated by a handful of companies, most of which are based in Asia.

According to a report by the Semiconductor Industry Association, Asian companies hold more than half of the global semiconductor market. Taiwan Semiconductor Manufacturing Company (TSMC), Samsung, and SK Hynix are three of the top five semiconductor manufacturers in the world. China, too, has been actively investing in its semiconductor industry, with the aim of becoming self-sufficient in chip manufacturing.

The Impact of COVID-19 on Chip Manufacturing

The demand for chips skyrocketed during the pandemic, as more people started working and learning remotely. However, the supply chain for semiconductors could not keep up with the demand, leading to a global shortage. The pandemic also disrupted the manufacturing processes of semiconductor companies, as factories were closed or operated at reduced capacity. As a result, many companies have struggled to keep pace with demand, while prices of chips have surged.

According to a report by Bloomberg, the semiconductor industry's revenue is expected to grow by 12.5% in 2021, owing to increased demand for chips. However, the industry is still grappling with supply chain disruptions, which are expected to last well into 2022. The shortage has affected several industries, including automotive, consumer electronics, and medical devices.

The Future of Chip Manufacturing

Amidst the global shortage of semiconductors, there is growing concern about the concentration of chip manufacturing in a few companies. The pandemic has highlighted the fragility of global supply chains, and countries are now looking to ensure their own supply of semiconductors. The US, for instance, has announced plans to invest $52 billion in domestic chip manufacturing, while the European Union has launched a three-year, $145 billion program to boost its semiconductor industry.

The shift towards domestic chip manufacturing is expected to have several benefits, including better control over the supply chain, reduced dependence on foreign countries, and greater innovation. However, it is also likely to lead to increased competition, as countries seek to establish themselves as semiconductor leaders. Moreover, the capital-intensive nature of the industry means that not all countries will be able to compete on an equal footing.

Conclusion

1. The COVID-19 pandemic has highlighted the fragility of the global semiconductor supply chain, leading to a shortage of chips.
2. Countries are now looking to ensure their own supply of semiconductors by investing in domestic chip manufacturing.
3. The shift towards domestic chip manufacturing is expected to lead to increased competition and innovation, but not all countries will be able to compete on an equal footing.