Christmas is already at stake. Food, turkey and toy shortages are all worrisome as supply chain problems are exacerbating consumer conditions.
Today, the outlook for silicon deficiency can affect electronic products such as smartphones and game consoles, as well as many other products and devices that rely on computer chips.
With the price of silicon metal quadrupled in just two months, the shortage of silicon chips is sending a shock wave into the world of technology.
The signs of the crisis go back a few months. The car maker closed its production line in April due to a shortage of chips.
At the time, Taiwan’s typhoons were accused of affecting production, and the Covid-19 drastically reduced demand for cars, turning the chip industry into a fast-growing computing sector.
However, the current situation is more serious and widespread, with the protracted economic shock of the pandemic combined with many factors pushing up the price of silicone metals.
Silicon is an important component of our mobile phones and computers, as well as glass, concrete and auto parts.
On Friday, Norwegian chemical company Elkem ASA said it had stopped selling some silicon products.
The shortage is the result of a complete storm of public health, geopolitics and climate change.
The core component of silicon metal contained in sand and clay makes up a whopping 28% of the earth’s crust. So it should be cheap and abundant.
However, the slowdown in silicon production is linked to an increase in demand that reveals the volatile foundations of many of the products we take for granted.
The demand is, of course, related to Covid-19 as employers and teleworkers have ordered more hardware and gadgets online.
Apple recorded a 54% increase in revenue in the first three months of 2021 compared to the same period last year.
However, Covid-19’s manufacturing industry has also plummeted, making it impossible for industrial workers in many parts of the world to be at work.
Due to the relaxed restrictions, the number of employees who can be on site at one time is still limited due to the risk of infection. The production of both metallic silicon and semiconductors has been hit hard.
The world also relies heavily on China for silicon chips, the first country to be hit by the Covid-19 pandemic.
Over the past few years, China has significantly reduced coal usage to reduce carbon emissions. The country is currently experiencing rising energy costs. But Beijing fears passing costs on to consumers could lead to higher inflation, so instead it distributes electricity to industrial customers who are hitting silicon production.
It is impossible to understand the silicon crisis without considering the growing tensions between China and the West.
Beijing informally banned coal imports from Australia after the Australian Government requested an international investigation into the origin of the coronavirus pandemic. This has had a knock-on effect on China’s energy supply and thus silicon production.
Meanwhile, former US President Donald Trump’s trade sanctions on China have blacklisted China’s largest semiconductor maker, a partially state-owned international assembly of semiconductor manufacturing, from the purchase of key components in the United States.
US President Joe Biden has maintained Mr. Trump’s heavy sanctions.
The new Aukus Defense Pact between Australia, Britain and the United States, where Australia will buy a new nuclear-fueled submarine, urged China to blame the Western nations for “Cold War spirit and ideological prejudice.”
Trade disputes over both Australian coal and US technology can be protracted.
How long will the shortage last? “It could still take years for the ecosystem to address the foundry’s incapacity,” said Pat Gelsinger, an American executive and engineer and CEO of Intel.
But there are also more optimistic ones.
In a comment reported by Bloomberg, Buddy Stemple, Chief Executive Officer of Constelium Rolled Products, said:
“Hopefully, there’s a lot of focus on supply chain disruptions that can come back in a satisfying period to keep things moving.”
But whether it’s a moment or the arrival of a new era, the Silicon Crisis has revealed how much of modern life is literally built on the sand.
Bill Mitchell, BCS Policy Director at the Chartered IT Institute, said:
“If the usual rules of capitalism work, what happens is that demand exceeds supply and prices rise.”