Chip shortages are creating a new crisis in the world

The microchip on the main board in the assembly line in the light blue scene with lighting effect, computer part manufacturing concept.

The world is currently in a COVID-19 pandemic crisis. The outbreak of this mysterious disease has affected most countries of the world for over a year and has caused many problems. The economic crisis can be considered the biggest and worst result of this virus. According to our current knowledge, the virus started in China and later spread to the rest of the world.

Industrialized and rich countries have more production and industrial centers than Third World countries. Thus, the spread of the virus within those countries has complicated the crisis both for them and for the rest of the world.

When the industrialized and developed countries were forced to close their large and main businesses due to this pandemic, first their production-oriented economy faced problems and then the world faced a shortage of supply and demand, and then weaker and less developed countries. The findings ran into economic problems.

Now, one of these problems, which may be very small in size, but its presence is very much affecting the world economy, is facing a serious crisis. “Chip shortage in the market”

Before the COVID-19 outbreak in the world, there was a great economic war between the two industrial and financial giants of the world. Economic war between the United States and China.

Donald Trump strongly believed that China had infringed on American technology ownership for years. The Chinese received higher education by entering American universities, and many of these students returned to China and transferred to China the new knowledge and science they had learned from American educational institutions.

An important part of the economic war between the two countries was the issue of the electronics and semiconductor industries.

Semiconductor industry is also one of the mother sciences that brings with it many research disciplines. From geological sciences, chemistry and materials to atomic-molecular physics and engineering sciences are active in this field.

Most of the US sanctions clauses were about these technologies. China has seen significant growth in the communications, information and electronics industries in recent years. Huawei and HiSilicon are clear examples of this.

According to Fortune, chip purchases from SMIC fell sharply. The Chinese chipmaker accounts for about 5 percent of the global semiconductor market and about 10 percent of the chip market.

Of course, this trade war also had the color and smell of security. Chinese companies active in the field of communications and information with the production of electronic systems and malware are trying to increase their information umbrella and influence in the world.

Between 2017 and 2018, many tech market analysts, such as the famous Bloomberg Network journalist Emily Chang, warned of this economic and technology-driven war, which could lead to production crises and, consequently, economic problems not only for America and China but also for all global markets.

Prior to the COVID-19 outbreak, following Donald Trump’s decrees to ban Chinese companies operating in the basin, they could not use American technology in Silicon Valley, or even trade with many Western companies.

This made it very difficult for Chinese companies that still needed advanced American technology, and on the other hand, American companies wanted to assemble their consumer goods at cheaper prices in China.

But with the outbreak of the COVID-19, the situation changed completely. Over time, the disease became more common in American society, and companies and factories closed one after another.

Manufacturers of processors and chips were no exception. Chip production requires special locations with huge investments and specialized manpower that are actually in the production site and laboratory.

The closure of these centers spontaneously affected the production of these small but vital parts in human life today, and on the other hand, due to jobs that were forced to buy and sell and telecommunications and online, the need and demand to buy a laptop, Computers and electronic gadgets became more and more.

When Joe Biden came to power, he faced one of the first crises he did not even think about, the crisis of integrated circuit shortages. In the first month of the new administration, US President Joe Biden issued a government decree that technology companies in the United States should find a way to increase chip production as soon as possible.

What are the consequences of chip shortages in the world?

The world and US car giant General Motors has announced in its latest statement that it will close at least three mass production units in the United States in February and more units are likely to close by mid-March.

Ford, another world-renowned automaker, has done the same, shutting down its largest plant in the US state of Kentucky indefinitely. The lack of chips for the ABS brakes and intelligent controllers in the fuel sector has made the production line a problem.

Chrysler is facing the same problem. And has stated that it cannot have special purpose processors for its sedans and SUVs.

Japanese companies Toyota and Honda are also unable to complete the assembly line of their consumer and even luxury cars due to the depletion of their warehouses of computer chips.

This problem has reached European companies as well, and powerful German companies such as Volkswagen and Daimler-Mercedes are also struggling.

According to Shi Jianhua, deputy secretary general of the China Automobile Manufacturers Foundation, the shortage of chips will have a profound effect on the country’s automotive industry, which began in late December 2020 and is likely to continue into 2021.
An average car needs 100 processors for its various parts. From chips for smart brakes to engine and in-car controllers.

This crisis has become more apparent for electric vehicles. Tesla is facing a neural processor crisis that Nvidia has always been customizing.

This is only part of the problem for the world’s manufacturing industries due to chip shortages.

Texas Instruments announced last month that it was experiencing CPU, DSP production problems.

The lack of processor production for this American company is literally a domino-like industrial disaster. For example, the US aerospace and military industries, such as Lockheed Martin, are their largest trading partners in the field of chip manufacturing for military equipment such as fighters, tanks, drones, helicopters and defense telecommunications equipment.

Computer and mobile phone companies also faced new problems. Demand for digital products has increased in the last year, but the processor is not available for this market. In 2020, for example, computer sales exceeded $ 302 million, according to Bloomberg, which shows that computer sales have increased by 13 percent over the previous year.

In addition, Sony has announced that it will reduce production of its fifth-generation PlayStation due to a shortage of chips, and will temporarily shut down parts of its product line and even many of its outlets.

In recent months, with the rise of Joe Biden as the new President of the United States, the value of Bitcoin has generally grown and has encouraged many to invest in this sector.

Now, with the emergence of the problem of shortage of different processors in the market, Bitcoin is also on the verge of insecurity. The production and supply of mining devices that produce and extract this digital currency will face a sharp decline, which will increase the price of these extractors and rise profits and monopolize companies such as Nvidia, which in itself will cause a crisis and balance in international Stock markets will be interrupted.

According to White House spokeswoman Jen Psaki on February 11th, the Biden administration announced plans to address the challenge, but the government’s efforts do not seem to be coming to fruition any time soon.

According to Jen Psaki: Some senators and lawmakers are asking for government help to boost the chip market, but that has been going on for years, and building a small chip plant will require at least $10 billion in funding, given the economic situation. Today, the government and technology companies count this amount.

According to Reuters: Taiwan’s Minister of Economy Wang Mei-Hua also reacted to the shortage of these important electronic and computer components and announced that he had received a letter from the White House in this regard.

According to the Minister, the semiconductor manufacturing companies in Taiwan have used all their resources to solve this challenge. Meanwhile, German Economy Minister Olaf Scholz has sent a letter on the same issue, announcing his readiness to work with the United States and Taiwan.

Companies such as Apple, Qualcomm, Nvidia and TSMC are committed to devoting all their time and ability to solving this problem.

These are just a few of the manufacturing industries in the world that are facing serious problems.

Aerospace industries, home appliance manufacturers, security service providers and even renewable energy companies are facing this problem.

The closure of this number of manufacturing companies in the industrialized countries of the world sounds a great alarm. But according to Bloomberg, this problem will not be solved overnight and the world is not facing a new crisis.

Unemployment of large numbers of automotive production line workers in the United States, Europe and East Asia, the dismissal of technicians from aerospace companies, the closure of electronics and entertainment stores all indicate an unemployment and job crisis in Western and industrialized countries in East Asia.

Factory failures, even after a nationwide vaccination, could not quickly return to the old days, and G7 governments would face a bigger problem than COVID-19.

Unemployment in these countries promotes right-wing ideologies such as Nazism and Trumpism. Right-wing groups in the last two decades have always held the slogan that economic crises and social inequalities are due to the growth of liberalism in their countries.

Not only will extremism grow, but social chaos, trade union strikes, and crime in cities and countries will be inevitable.

The lack of such a small piece has overshadowed the production of all major industries and large businesses, which has led the US President and the ministers of developed countries to such an endeavor and fear. This problem can be an important point for developing countries in the Middle East such as Iran, Turkey, etc.

These countries have highly educated specialists in the field of modern technologies and industries, and by creating this alarm for developed countries, they can create an opportunity for themselves and similar countries to invest in the production of this technology. This can help their own economy and play an important role in international financial equations and production in the event of such global crises.

BY: Soheil Seyed Jamali