There would be no wrong in saying that technology is evolving at a rapid pace and leading us towards an unexpected future. The extent of technological advancements is beyond our expectations. Experts try their best to share their insights to give us an idea of what we can expect in the upcoming years.
Unfortunately, the world is facing a chip shortage crisis currently during the pandemic of COVID-19. Numerous sectors are facing manufacturing delays of electronic devices as the consumer demand bounces back during the crisis of coronavirus.
This problem is leading us towards several causes, including the bitcoin mining sector in China, coronavirus lockdown in Southeast Asia, disruption in the automotive supply chain, bulk buying by the United States sanctions-hit Chinese tech giant Huawei technologies, and so on.
It is claimed by Volkswagen that sadly they will manufacture 100,000 fewer cars in the first quarter of this chip shortage crisis. The same problem is faced by other automotive industries including Honda, Nissan, Renault, Audi, and General Motors. Chinese car sales already faced a downfall of 6.8% and recovered rigorously 80% in February. And sorrowfully the industry is facing a crisis again because of this chip shortage dilemma.
Moreover, the global chip shortage is obstructing the production of bitcoin mining sectors, especially in China. Bitcoin faced a downfall of 20% from the high records it banged two weeks ago. Sadly, there are not enough chips to accelerate the production of mining rigs. According to the report by Samuel Shen and Alun John, Zhao said bitcoin mining in China used to account for as much as 80% of the total of the world. It is now accounted for around 50%.
CEO of Shenzhen-based sourcing company Sand and Wave, Donny Zang stated that,
“We have been experiencing a shortage of components for the whole electronic industry. We were originally planning to complete the manufacturing process within a month, but now it seems like it will take a couple of months to complete production.”
Why Are Computer Chips Predominant?
Computer chips are the heart of modern innovative technology. Chips are the most crucial component of modern and innovative driver aids, infotainment systems, and various other electronic components. Consumer demands for technology have surged evidently because of the pandemic-driven popularity, including tablets, game consoles, laptops, and other electronic devices.
It all starts with silicon, which is the primary constituent of sand. Silicon is the second most common substance that exists on earth, which is the reason why it is inexpensive yet abundant. Let’s have a look at why computer chips are important among the automotive industry and bitcoin mining sectors.
Automotive chips are utilized for controlling and observing different capabilities in a vehicle. Such chips utilize calculations to explain different assignments and make the driving background remarkably less demanding for an operator. The latest chips are introduced in the automotive industry which proved to be reshaping the landscape of autonomous sectors.
The advancement in automotive chips aims to develop such components that simplify system designs by enhancing efficiency, accuracy, and reliability. Safety and reliability are core components of automotive systems. Also, the latest automotive chips focus on designing such development systems that help original equipment manufacturers to fulfill standard demands, such as BS-VI for both two and four-wheelers.
For example, ROHM obtained ISO 26262 process certification, fulfilling the international standards for the safe functionality of automotive products.
Chips for Bitcoin Mining
There would be no wrong in saying that digital currency is replacing paper money in this modern era of technological advancements to combat criminal activities. This revolution proved to be influential for international trades and corporate operations.
Consider the fact, bitcoin mining is competitive. Bitcoin mining can be fun yet profitable at the same time if cheap electricity is accessible to you and you get the best and most efficient Bitcoin mining hardware. Bitcoin miners utilize powerful and efficient special-designed computer equipment or rigs for the verification of bitcoin transactions, which produces newly minted bitcoins.
Special hardware is required to mine the bitcoin profitably called Application Specific Integrated circuits (ASICs). All bitcoin mining is executed on dedicated Bitcoin Mining Hardware ASICs. It is usually performed in thermal-regulated data centers with low-cost electricity. Moreover, there also exists bitcoin hardware wallets such as Ledger Nano X which plays a vital role in the security of bitcoin. Best bitcoin miners can be recognized on the basis of efficiency, hash rate, and price.
How Did This Chip Shortage Come Into Being?
The global market has already been struggling to survive during the pandemic of COVID-19 under an extending regulatory push towards technological advancements to keep up with the future of mobility. Automotive electronics proved to be the most drastically evolving market in the computer chip industry.
According to Deloitte’s report, 12% sale revenue is predicted by 2022. Underestimated expectations lead the industries to end up suspending effectively that help steers, brake, and push up windows they actually require. The main focus of organizations is always to keep up the pace of technological advancements. In October 2019, the correspondence of SK Hynix Inc. and Samsung Electronics Co. were withstanding prospective overproduction issues of a certain type of chips.
Another reason for this issue is there is no fast substitute. Customers usually put orders 8 to 10 days ahead but now the order takes much more time because of the pandemic of COVID-19. For instance, carmakers in china do not have more than a couple of weeks in keeping with cost-friendly and lean manufacturing operations. The overall chipmaker cycle is very lengthy, from development to certification.
The COVID-19 pandemic has not made this additional crisis easier in any manner. It seems like none of the players are working together in harmony. The supply-demand is enormously increasing at a rapid pace. Even if the electronic consumers are sucking off the chip supply, it should not affect the two major sectors i.e. the automotive industry and bitcoin mining sectors in any manner for the betterment of this world.
Disruption In Production
Undoubtedly this global chip shortage is the reason for disturbance in the manufacturing process in various sectors such as game consoles, smartphones, automotive industry, bitcoin mining industry, and many more.
Let’s have a look at the following 2 sectors that have faced drastic crises and downfall because of this chip shortage dilemma.
Carmakers are Hobbling at The Worst Possible Time
Major automakers have cut down their automotive production in various countries because of global semiconductor shortage. Chipmakers are struggling to meet emerging demands from consumer-electronics companies. Well-known car maker industries, from Volkswagen AG to Toyota Motor Corps, are struggling due to this crisis and are at risk of not getting enough parts to boost the fledgling recovery in their own industry.
Automakers all around the globe are planning to cut down their production.
The state of play of Japanese firms are as follow:
- Honda was among those automakers to warn of a chip shortage. It announced a 2 days delay in the output at its UK plant on January 5th and January 6th. Then again Honda announced that it would stop production at Swindon from January 18th to January 22nd due to global chip shortage.
- Toyota claimed on Sunday that it is planning to cut down the production of its full-size Tundra due to a global shortage of semiconductors. The company is considering trimming the output by 40% of the Tundra model which is under construction in San Antonio.
- On January 8, Nissan said that it would be cutting its production at one of its plants in Japan this month. Spokeswoman Azusa Momose said that the global semiconductor shortage is predominantly affecting the manufacturing processes in automotive industries. The Oppama plant in Japan will adjust its production by reducing the production of Nissan Note due to this chip shortage crisis.
Bitcoin Mining Sector chokes in China
Unfortunately, the global chip shortage is choking the production of bitcoin miners, especially those which are situated in China. Cryptocurrency demands are surging especially during the pandemic of COVID-19.
Bitcoin, the world’s largest cryptocurrency is under threat, and bitcoin mining sectors are under the strict analysis of traders and users of this cryptocurrency. Bitcoin miners utilize efficient, powerful, and reliable special-designed computer equipment, for the address verification of bitcoin transaction processes. The profitability of mining depends upon bitcoin’s price.
Alex Ao, the vice president of Innosilicon, a chip designer and provider of mining equipment said that,
“There are not enough chips to support the production of bitcoin mining rigs. ”
The director of financial services at Babel Finance, Lei Tong stated that
“Almost all major minors are scouring the market of rigs, and they are willing to pay high prices for second-hand machines. The purchase volumes from North America have been huge, resulting in a squeeze supply in China.”
The cryptocurrency stream is affecting those who are able to mine. Bitcoin has risen at a rapid yet natural pace. Institutional investors profit both large scale and competency in management, whereas retail investors will be destroyed who couldn’t keep up. The advent rise in the prices of bitcoin prices has affected the one core advantage of low electricity cost in china.
“When gold prices rise, you need more spade. When milk prices rise, you need more cows.”
Beware Of Uncertainty
The very first industry to be affected by chip shortage is the automotive industry. The second industry to be affected by the chip shortage crisis is the telecom equipment industry. Ericson said that it had lost $400 million in revenues due to chip shortage. According to the latest predictions, the next industry to be hit due to this chip shortage crisis is the smartphone industry. It seems like none of the present generations of industries that involve semiconductors can bear the pressure of this downfall.
Alcatel-Lucent CEO Ben Verwaayen said that,
“It is a global problem which is faced by a wide range of industries and this issue can’ be resolved within next 3 months.”
Sprint Nextel is not able to supply HTC’s 4G phones due to the shortage of ICs. also there’s a three-week delay at retail for apple 4. The global chip shortage crisis was already predicted in many research reports and industries should have already acquired precautionary measures to deal with this crisis in the future. The issue first came to light during the second half of 2020 in India and China, but it spread to other regions rapidly because of the connectivity of the global supply chain.
“Audi boss has admitted that a huge production shortage will occur due to this chip shortage crisis and the layoff of 10,000 staff.”
Intel, which holds 80% of the market of PC chips, already warned PC makers that the shortage of chips will continue to foresee in the near future despite record spending over the last year to ease the production problem. Intel also apologized to its customers for struggling due to the chip shortage crisis. This crisis has decreased the growth rate in the PC market.
I am sure that the advancement of nanotechnology better composite will emerge to replace silicon. Do you know that the manufacturing of computer chips using chicken feathers is possible today? However, for the time being, industries might halt their manufacturing process. I’ve gone through many articles and according to my research, sales of electronic items that use chips were so high in demand especially during the pandemic of COVID-19 that the production diverted to other products.
As I’ve already mentioned that Toyota will reduce the production of its Tundra full-size pickup truck at its San Antonio, Texas, plant. But spokesman Scott Vazin did not immediately know how many units would be lost. Moreover, China’s largest contract chipmaker has sent chip firms around the globe, crawling to find new partners.
Hence, this chip shortage is a short-term thing as industries are already prone to finding alternatives. It will take a while to get inventories refilled so that it does not adversely affect assembly productions. Industries will not make long-term changes to deal with short-term supply chain management issues.