Image by Elshan Neymatov on Unsplash
The entire world relies on microchips, also known as semiconductors. These are small, almost microscopic, central processing units (CPUs), which are used to power phones, laptops, water dams, and nearly everything that relies on electricity and data processing. Without them, we wouldn’t have smart watches, paper-thin iPhones, or smart glasses. When the COVID-19 pandemic hit, the world quickly realized its importance and the fragility of the microchip technology supply chains. COVID-19 exposed our global dependence on these semiconductors, causing widespread shortages and reshaping entire industries built around semiconductors.
What happens if there is a semiconductor shortage with millions of people staying at home, relying on their laptops and phones to work? The result would be massive disruptions across manufacturing industries struggling to meet demand. Due to worldwide lockdowns, especially in East Asia, where most of the global semiconductor manufacturing is done, many of those factories had to shut down. In 2023, almost 11,000 microchip factories closed. On top of that, Apple, Microsoft, Nvidia, AMD, and many more tech companies depend on chips from these countries. So, prices for these items have inevitably risen.
Something we often overlook with microchips is cars. Every modern vehicle in the 21st century uses at least some piece of microchip to power its airbags, screens, reverse cameras, and more. To put into perspective just how bad the microchip shortage was, consider the fact that many vehicle companies like Ford, Toyota, and BMW had to cut production, fire workers, and raise prices on their cars. North American automobile companies had to cancel the production of over 300,000 vehicles scheduled for March 2023.
To combat this problem, many governments enacted policies to aid recovery, although some geopolitical tensions persisted. The CHIPS Act, a 2022 law that allocated $53 billion to support superconductor manufacturing in the United States, significantly impacted the supply chain, as some companies no longer had to rely on foreign-made chips, which had never been a reliable solution. As manufacturing shifted back to the United States, it created many jobs, lowered prices for microchips, and helped balance the supply for the ever-growing demand for microchips. Meanwhile, in Eastern Asia, power struggles between Taiwan and China diverted attention from microchip production, affecting supply. However, by this time, the supply was starting to level out, and prices slowly crept back to normal.
From smartphones to airplanes, nearly every aspect of modern life came to a halt during the global chip shortage. It revealed how interconnected our daily necessities are and how disruptions in one area could impact the entire rhythm. Microchip companies now keep a steady inventory of chips, invest in local production, and work with governments to make sure shortages don’t happen again. If something like this happens again, recovery will be easier. Just as nations diversify their supply chains, we too can learn to build flexibility into our own routines and dependencies.
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