How the pandemic and the chip shortage may keep you from getting a car


This little chip’s production shortage may keep you from buying a car.

A gleaming smile appears on Joe’s face as he looks at his shiny new driver’s license. After two years of practicing and many months of waiting, he had finally done it. He passed the test, and now the only thing standing between him and freedom was a car. But for Joe that was no issue. Or so he thought.

He had saved up about $20,000 from working long hours at his part-time job. Checkbook in hand, he walked into his local Ford dealership, ready to buy a new Focus. But when he got there, his smile was washed off his face.

“Unfortunately, sir, we don’t have any cars in your price range.” The dealership employee delivered the bad news.

“How’s that possible?! I checked last month and there were so many!” Joe was infuriated. How could there not be a car for him when there were thirty there the month before?

“They’re all sold out, and we aren’t getting a new shipment for at least a few months. Again, I’m sorry sir.”

Sadly for Joe, and millions of other people around the world, this is a very real situation. The ever-expanding semiconductor shortage has greatly reduced the supply of cars and much more. From smartphones to laptops, TVs, cars, and even fridges, every aspect of modern life relies on semiconductors. However, the world is currently experiencing one of the largest shortages of semiconductors ever, mainly brought on by the effects of the pandemic. What does this mean for the average consumer? Well, it means a lot.

Well, what is a semiconductor anyway?
Semiconductors are both insulators and conductors depending on the temperature, and they provide the basis for the electronics that power everything from a radio to a cell phone. Because they are a vital part of nearly everything, this shortage spells many negative consequences for the consumer and the economy.

How did it start?
This shortage all started with the COVID 19 pandemic. The pandemic caused a slow down in the industry, with factories being closed or operating at reduced capacity. This, in addition to other factors, helped spark the shortage. With everyone working from home, many people’s computers wouldn’t cut it for constant Zoom calls and virtual applications. Students also found themselves in need of new computers to get their work done. The release of new phones, gaming consoles, and, most importantly, graphics cards helped push demand to all-time highs. Similarly, with a sharp rise in Bitcoin prices, cryptocurrency miners increased demand exponentially. Although companies had scheduled more than enough supply, no one had expected this sudden rise in demand. The issue for these companies was demand, not supply. Because of this, Intel’s CEO and other experts do not expect the shortage to end until well into 2023 or even later.

Adding to the shortage were the miscalculations of automotive companies. Nowadays, cars all have chips that control their screens and other vital pieces such as safety equipment. As such, automotive companies make up a large portion of the semiconductor market. When the pandemic hit, these companies cut back their orders of chips due to low demand. However, an unexpected recovery at the end of 2020 led to a rise in automotive demand. These companies couldn’t keep up and ordered more chips. However, most semiconductors were being diverted to PCs making it difficult for automotive companies to get a hold of semiconductors, consequently making it harder for the consumer to buy a car.

However, the pandemic is not all to blame. This shortage was bound to happen in the near future, but the pandemic lit the fuse. Currently, two companies, TSMC and Samsung, produce 70% of the world’s semiconductors. With such a high concentration, there were bound to be slowdowns if there was ever an increase in demand. As of now, both companies have to operate at more than 100% capacity, with their customers (the people who make cellphones and cars) demanding more chips than either could produce. Due to the absurdly high price of entry in both time and money (taking five years and more than $10 billion per factory), building more infrastructure will not solve the issue fast enough.

How does this affect the consumer?
As with any shortage, the consumers are affected the most. Because there is a limited amount of chips being made, there is less product available to the consumer. It also means that whatever product there is, the price will be much higher. For the average consumer, that means that there will be fewer computers, fridges, cars, and other products that need semiconductors, and they all will cost more. Scalpers, people who buy products to sell them for more secondhand, are also causing the shortage to be extended. They reduce the amount of supply and raise the prices overall. The best analogy for the situation is famine. Consumers have a hard time finding products, and when they do, they have to pay an arm and a leg for them. What is worse is that, often, the companies who make the products can do nothing about it but wait.

What is being done?
Right now, companies are making plans to increase production with Intel building two new semiconductor factories in Arizona and other companies creating plans to expand their foundries. However, like mentioned before, this will take years to come to fruition. So, for now, the world is stuck waiting. Until demand is met and people receive their products, the shortage will not end. The situation is turning around, nevertheless, as more and more products are being created, satisfying more consumers. Hopefully, if all goes to plan, the shortage will end soon, and the world will return to normal.