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Let's straightaway dive into the topic of the day- “Chip Shortage: Policies and Market”

What is chip storage?

A chip shortfall which occurs when demand for silicon chips exceeds supply in the integrated circuit industry. It is also known as a semiconductor scarcity or a chip famine.

What is this chaos with chip shortage?

Global market is witnessing chip shortage in almost all sectors. Qualcomm Inc is one of the big chipmakers that is having difficulty keeping up with demand. The chip shortage is hurting supply lines to clients, according to Apple Inc.'s main supplier, Foxconn.

Currently, the majority of chip production takes place in Asia, where big contract manufacturers such as Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and Samsung handle production of hundreds of semiconductor companies.

The shortage situation is majorly because of a few reasons.

1.Fire at Japan’s Renesas Semiconductor Manufacturing Co. Ltd. on March 19.

2.Chip manufacturing disruption in Texas from the severe weather in February.

3.Indicates a sudden spike in demand for electronic products because of Work from Home culture.

Due to the deployment of the 5G smartphone and trade penalties imposed by the US on China prior to the pandemic, Huawei, one of China's largest 5G smartphone manufacturers, was unable to purchase processors after a set period of time. So, they put large purchase orders keeping foundries busy.

What are the effects of chip shortage?

The highly affected sector is the automobile industry. It is estimated that chip shortage can impact around 1.3 million units of global light vehicle production. Automobiles have become increasingly reliant on chips.

Many companies have been compelled to reduce production of less profitable automobiles as a result of the crisis.

According to AutoForecast, the chip shortfall has resulted in Ford pulling 324,616 vehicles from production, GM pulling 277,966 cars from manufacturing plans, and Stellantis cutting output by 252,193 units as a result of the deficit. The shortage has cost Honda, Nissan, Subaru, Toyota, and Volkswagen between 20,000 and 46,000 units. According to the research, Volvo had the fewest vehicles affected by the chip shortage, with only 1287.

According to another survey, semiconductor scarcity has an impact on a staggering 169 industries.

How to deal with it; now and for the long term?

Biden ordered a government-wide 100-day supply chain review focused on semiconductor production and sophisticated packaging, essential minerals, medical supplies, and high-capacity batteries to address the shortage in the United States. America must also increase its investment in advanced semiconductor research and development.

IBM has long aided in the strengthening of the US microelectronics supply chain, and it has recently begun laying the groundwork for an ecosystem to help secure and advance the US microelectronics supply chain, as well as leading the charge on domestic next-generation AI chips and systems innovation to meet future needs.

There will, however, be no quick remedy. The supply of semiconductors will eventually catch up with market demand, but there will be some short-term hardship.

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