2020–present global chip shortage
The 2020–present global chip shortage is an ongoing crisis in which the demand for integrated circuits (commonly known as semiconductor chips) is greater than the supply, affecting more than 169 industries and has led to major price increases, shortages and queues amongst consumers for automobiles, graphics cards, video game consoles, computers, and other products that require semiconductors. Commonly cited causes for the shortage include the COVID-19 pandemic, the China–United States trade war, and various severe weather incidents.

Causes
The global chip crisis is due to a combination of different events with the snowball effect of the COVID-19 pandemic being the primary reason for accelerating shortages. Another contributing factor is that demand is so great that existing production capacity can't keep up. Other causes have been attributed to the China–United States trade war and the 2021 drought in Taiwan.

COVID-19 pandemic

An increase in remote work and remote learning caused a surge in demand for computers, network peripherals, and other consumer electronics with chips. Due to lockdowns, chip production facilities were shut down, leading to the depletion of inventories. In the fourth quarter of 2020, traditional computer sales saw a 26.1 percent growth over the previous year.

China–United States trade war

In September 2020, as part of the economic conflict between China and the United States, the US Department of Commerce imposed restrictions on China's largest chip manufacturer, Semiconductor Manufacturing International Corporation (SMIC), which made it harder for them to sell to companies with American ties. These restrictions forced companies to use other manufacturing plants like Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Samsung. However, these companies were already producing at maximum capacity.

Severe weather
A severe winter storm in February 2021 forced the closure of two plants in Austin, Texas owned by Samsung and NXP Semiconductors, setting back supply from these two plants by several months. 

Taiwan is the leader of the global semiconductor industry, with TSMC alone accounting for more than 50 percent of the global wafer foundry market in 2020. In 2021, Taiwan experienced its worst drought in more than half a century, leading to problems among chip manufacturers that use large amounts of ultra-pure water to clean their factories and wafers. For example, TSMC's facilities used more than 63,000 tons of water a day, more than 10 percent of the supply of two local reservoirs.

Fires at facilities
An Asahi Kasei semiconductor plant which specializes in ADC and DAC components caught fire in October 2020. Another Japanese factory owned by Renesas Electronics, which supplies 30 percent of the global market for microcontroller units used in cars, caught fire in March 2021; Renesas said it would take at least 100 days for them to get back to normal production. In January 2022, a fire from the Berlin plant of ASML affected the production of EUV lithography equipment used in chip production.

Impacted industries
According to an analysis by Goldman Sachs, at least 169 industries have been impacted by the global chip shortage, with the automotive and consumer electronics industries among the most affected by the crisis.

Cars

The average modern car can have between 1,400 and 1,500 chips, some even up to 3,000. Cars account for 15 percent of global chip production, while personal electronics account for around 50 percent. Chip revenues are even more skewed towards non-automotive sectors. The chip shortage is expected to cost the global automotive industry US$210 billion in revenue in 2021. Despite lower sales, some manufacturers increased profits over 2020, as General Motors, for example, saw record profits for 2021, due to resilient demand and decreased financial incentives offered to buyers.

At the start of the pandemic, car manufacturers incorrectly predicted that sales would drop, canceled chip orders, and were unprepared to meet demand. Chip manufacturers had more commitments from the IT sector, which reduced capacity for car chips. Ford parked thousands of unfinished vehicles at Kentucky Speedway as the company waited for chips to finish assembling those cars. Toyota planned to cut vehicle production worldwide by 40 percent in September 2021, while General Motors announced it would halt production of almost all cars at its North American plants for a week or two that same month. During the third quarter of 2021, there were only two-thirds as many new car sales in the United States as there had been during the same time period in 2020, as supply could not meet demand. Opel closed its Eisenach manufacturing plant until 2022 because of the shortage, causing 1,300 workers to be temporarily laid off.

Graphics cards and gaming PCs
The global chip shortage made it difficult to acquire new graphics cards, while an increase in cryptocurrency mining in 2021 increased the demand even more. Finding gaming PC components became more difficult and more expensive, and as gaming PCs rely on either AMD or Nvidia to make their discrete GPU cards, both of those companies refreshed their lineups during the pandemic with popular new models that are very difficult to find, or priced 50 to 300 percent above MSRP.

Video game consoles
During the COVID-19 pandemic, cinemas and theaters were closed to prevent the spread of the virus, leading many people to turn to home entertainment during periods of self-isolation, which increased the demand for video game consoles. With the release of the ninth generation of video game consoles coinciding with the pandemic, demand increased even further, with both Microsoft and Sony reporting record demand for their new consoles. Microsoft expected in February 2021 that shortages of the Xbox Series X and Series S would continue until at least mid-2021, while Sony warned in May 2021 that short supply of the PlayStation 5 console would continue into 2022. Both companies use AMD chips manufactured by TSMC in their ninth-generation consoles, which puts extra strain on the supply chain. As supply problems persist, scalpers are reselling the consoles on websites such as eBay for 50 to 100 percent above their retail price. Nintendo made 20 percent fewer Switch consoles. The company originally planned to produce as many as 30 million units, but will only be able to produce 24 million through their fiscal year, which is until March 2022.

Reactions

Governments
On February 24, 2021, U.S. President Joe Biden signed an executive order trying to address the chip shortage by reviewing options to strengthen the semiconductor supply chain. Later in April, CEOs of major technology companies and U.S. government officials attended a virtual summit with the White House to talk about improving the resilience of the semiconductor supply chain. In a new virtual meeting on September 23, 2021, which followed another meeting in May, the White House pressed automakers, chip manufacturers and others to provide information on the ongoing crisis that has forced cuts to U.S. automobile production, and to take the lead in helping solve it.

On September 15, 2021, President of the European Commission Ursula von der Leyen trailed a forthcoming "European Chips Act" in her State of the Union address. It was announced that the European Union will use legislation to push for greater resilience and sovereignty in regional semiconductor supply chains.

In December 2021, India outlined a plan to boost its chip manufacturing base.

Companies
On July 22, 2021, Intel CEO Pat Gelsinger said he expects the chip shortage will get worse in the second half of 2021 and that it will be a year or two before supplies return to normal. On August 19, 2021, Jensen Huang, CEO of Nvidia, said he expects the shortage to continue well into 2022, while AMD CEO Lisa Su said on September 27 that the shortage would improve throughout the second half of 2022, though she warned that supply would remain tight until then. However, IBM CEO Arvind Krishna said on October 11 that any prediction of a resolution to the chip shortage by the end of 2022 is optimistic, and that he sees it "more likely" that the issue will not be fully solved until 2023 or 2024.

On September 24, 2021, Taiwan's TSMC said it is actively supporting and working with all stakeholders to overcome the global chip crisis, after its participation at the White House virtual meeting on September 23. Earlier in April 2021, TSMC announced that it plans to invest US$100 billion over the next three years to increase capacity at its plants, days after Intel announced a US$20 billion plan to expand its advanced chip making capacity in Arizona. Already in May 2020, TSMC announced its US$12 billion plan to build and operate a semiconductor fab in Arizona, their second manufacturing site in the United States. Construction is underway as of June 2021, with chip production targeted to begin in 2024.

On September 20, 2021, the CEO of U.S. automaker General Motors, Mary Barra, said that the chip shortage has forced a supply chain rethink. Barra said that the company will source more semiconductors directly from chip manufacturers instead of suppliers to adapt to the ongoing global chip shortage.

On November 29, 2021, Nissan CEO, Makoto Uchida, told the BBC it was too early to say when normal deliveries of microchips, and therefore finished cars, would resume.

References

2020s economic history
Economic impact of the COVID-19 pandemic
Chip shortage
Impact of the COVID-19 pandemic on science and technology
2020 in computing
2021 in computing
2022 in computing