Semiconductor chips come in two flavours — memory chips that store data and logic chips that process the data, functioning akin to the human brain, Dr Valli Arunachalam, a distinguished nuclear scientist, said on Monday (July 24). She was talking about the intricate world of these inedible, invisible chips that power the devices we rely on daily — from smartphones to vehicles — and how their shortage has sparked the global crisis known as ‘The Great Chip Crunch.’
The semiconductor industry houses an array of sub-flavours, each serving a unique purpose in various electronic devices, automobiles, and even advanced artificial intelligence-powered technologies.
One of the major industries to be badly hit by the chip shortage is the automotive sector. Arunachalam revealed that an average modern car contains a staggering 1,500 chips, controlling everything from airbags to emission systems.
The process of building these chips takes about six months due to the industry's commitment to maintaining a near-zero defect rate to ensure safety, which contributes to the lead time.
The pandemic further exacerbated the chip shortage, causing both labour and material shortages, along with government-mandated shutdowns worldwide. Auto manufacturers had to cancel orders amid reduced travel demand. As people stayed at home, consumer electronics became the priority, causing chip manufacturers to focus on producing chips for computers and phones instead of automobiles.
The sudden shift in demand and limited supply led to a demand-supply imbalance, amplifying the chip crisis.
Additionally, Dr Arunachalam emphasised that building more semiconductor fabs (fabrication plants) isn't a simple solution. Constructing a state-of-the-art fab can cost up to $10 billion and takes around three years to complete.
Furthermore, semiconductor chip manufacturing involves over 700 complex and precise process steps, requiring a vast infrastructure, ultra-pure water, and a highly trained workforce.
Furthermore, only a handful of companies globally can produce high volumes of these chips, with a significant concentration of chip manufacturing occurring in the tiny island of Taiwan, raising concerns about relying too heavily on a single source.
