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Opinion: Reasons for the computer chip shortage

Fmr. Sen. George Nodland, R-Dickinson, shares his take on reasons for the computer chip shortage.

Nodland
Fmr. Sen. George Nodland, R-Dickinson

Every day, in my conversations with various people, I hear comments about the computer “Chip” shortage that is causing a backlog for vehicles, farm machinery, construction machinery, and any other electronic device such as household products and even medical equipment. I researched the reasons for the shortage and found interesting facts about various “critical” items manufactured in other countries other than the United States.

Computer chips are manufactured in many different countries such as the United States, China, Japan, United Kingdom, India, Ireland, and Israel to name the majority produced. The largest companies that manufacture the chips by gross revenue are Intel Corp., Taiwan Semiconductor Mfg. Co., Qualcomm Inc., Broadcom Inc. and Micron Technology Inc.

The computer chip shortage was caused by the Covid-19 pandemic last year. So many of the automotive manufacturing plants had to shut down for a period of time. This caused them to cancel orders from many of their supply chains such as computer chip companies. More people were staying at home due to their jobs being eliminated and some people were able to do work remotely at home instead of the office. This resulted in people purchasing more products that used chips, such as laptops, gaming consoles, and other electronic devices causing a shortage of inventory of these items. Also, school children were staying home and doing school work remotely. Thus, the computer chip manufacturing companies changed their manufacturing to these devices. Also, the computer chip manufacturers were shut down for a period of time at the beginning of the pandemic.

Now that the economy is getting back to normal and people are getting back to work, they are ordering more products such as vehicles, machinery, and other electronic devices. Also, the government stimulus checks are giving people more discretionary income to spend on these new products. Manufacturers of these products are ordering exceedingly large quantities of the chips to make up for their lost business during the pandemic. Thus, the chip manufactures are scrambling to fill the orders with fewer employees and less manufacturing production capacity for the new business demands.

Automotive and industrial machinery use legacy node(larger in size) chip technology, whereas smartphone and other PC devices use newer(smaller) chip technology, therefore they are on the front line to get their chips before the automotive and industrial machinery manufactures. Some estimates are that legacy node chip technology industries such as automotive and industrial manufactures will not get chips until the third quarter of this year. Therefore, projections are that these industries will not have completed products until the first half of next year. Household appliances could be the next items affected from the chip shortage until the manufacturing of chips catches up with the demand.

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The price of the chips have increased from the demand. The chip manufactures are scrambling to build more plants and hire more people to meet the demand. But, it takes time to build plants and hire and train employees with the shortage of people wanting and willing to work. I personally feel that we need a change in the government policy to encourage business growth and incentivize people to work instead of relying on the government for their daily living needs. The United States was built on the work and entrepreneur philosophy and we need to get our people back to these principles.

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