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Concerning Shortage of the Chips which Run our Lives

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Since the re-opening of the world this Summer following successful mass vaccination programmes, many consumer goods have become harder and harder to acquire. Worldwide shortages have affected thousands of industries and the lack of microchips available has affected hundreds of industries alone, ranging from computers, cars, consoles, and phones.  

As Covid-19 spread around the globe and forced millions of people to work from home, the demand for computers and laptops rocketed by 11%. With rising demand and a declining supply as lockdown measures were put in place, the global suppliers of microchips began to struggle to meet demands. Companies such as Intel and Samsung, the two largest microchip manufacturers, were the most affected as their factories in China were shut down and offices closed in the United States.  

The situation only worsened with the announcement of next generation consoles. Both Play Station and Xbox announced their latest generation of consoles which require high-level microchips to run at the level promised by Microsoft and Sony. Despite both companies preparing for a high demand and huge sales by stockpiling hundreds of thousands of units, they still sold out and production quickly fell behind the demand for their products.  

Manufacturers have begun to ramp up production. But, microchips can take between for and five months to complete. With global demands remaining at a high level and the annual increase in demand around Christmas, it is estimated that the supply of microchips will meet demand by mid-2022, as long as it continues along its current trajectory. 

Due to its cheap labour, China has been the home of microchip production for over a decade. With its newfound wealth and expanding middle-class, China has seen its domestic markets rapidly expand. Over the course of the pandemic, many Chinese investors and companies have turned to crypto-currency mining, especially Bitcoin. Buying up thousands of processors to fill entire warehouses of miners to earn them hundreds and up to thousands of Bitcoins every week. Although this seems like a strange investment, it is an excellent way of seeing returns with global cryptocurrency markets reaching new heights each month and Bitcoin being valued at over £40,000. The demand for crypto mining systems only compounded the situation and created a new trend on social media causing demand to rise again.  

The entire motor industry has also been affected by the shortage. In recent months the value of second-hand cars has been steadily increasing. This is because vehicle manufacturers, both electrical vehicles and petrol/diesel vehicles, require microchips to run the complex system of electronics that make up cars. Issues with global shipping costs are also influencing the vehicle market as import costs have increased since the pandemic, so the rising prices of cars cannot solely be blamed on a shortage of microchips. However, it has undoubtedly exacerbated the situation.  

In the advanced global economies of the modern world, a shortage of such a key component in not just the everyday life of people, but also an important asset in global industries, is unlikely to be resolved in a short period of time. Despite the hope that production will match supply in 2022, the backlog of orders and an only ever-increasing demand will continue to strain the microchip industry.  

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