A chip shortage in the technology world has President Biden naming it a ‘top priority’. In a world where there are no shortage of problems, what could be so important? Let’s take a look at what a lack of semiconductors could mean for the country.
If you have no idea what these chips are or what they can do, Troy Segal of investopedia.com gives a great explanation. He writes, “A semiconductor is a material product usually comprised of silicon, which conducts electricity more than an insulator, such as glass, but less than a pure conductor, such as copper or aluminum. Their conductivity and other properties can be altered with the introduction of impurities, called doping, to meet the specific needs of the electronic component in which it resides. Also known as semis, or chips, semiconductors can be found in thousands of products such as computers, smartphones, appliances, gaming hardware, and medical equipment.” These chips are also used in the auto industry. Simply put, this is an incredibly versatile piece of technology that’s needed to make a large number of the items we use daily.
The tech industry is having issues with production. In fact, companies have reported a lead time of about 14 weeks or longer. This means that when a company puts in an order for semiconductors, they have a longer than usual wait time. Experts believe that because of this, numerous companies have doubled their orders to offset the wait. This has created a massive surge in demand that manufacturers can’t keep up with. Increased wait times could also lead to potential excess issues in the future as they work to ramp up production. If a business places a double order now, they probably won’t need as many units on their next order. This may eventually result in more semiconductors than manufactures can sell. This occurrence is known as a glut.
Another issue with production comes in the form of location. Most of these semiconductors are made in China. Due to struggling relations between the United States and China, government officials are concerned that purchasing technology from China could pose a national security risk. President Biden has been meeting with tech executives and urging them to shift their operations back to the U.S. He believes that investing in this aspect of our country’s infrastructure will benefit us greatly in the long run by making America more self- reliant. Fortunately, other politicians agree as he has received support from both sides of the aisle.
To help speed up production, there are a few companies who have announced their plans to adapt their U.S and European warehouses. They need time to build out spaces where semiconductors can be made. These changes will take place once the warehouses are retrofitted and is estimated to take roughly 6-9 months to complete.
While these changes don’t solve the immediate shortage, they will certainly set America up for further success in the future.