Semiconductor crisis and its effects

In recent years, it has been difficult to supply the demand for semiconductors correctly, reaching a critical point during the SARS-CoV-2 pandemic, when changes in consumer habits marked a new stage for many industries.

Among the effects of the semiconductor crisis is the decrease in automobile production, the closing of factories and the increase in unemployment; however, the automotive industry is not the only sector that uses this type of material. The video game industry has also suffered the consequences, to the point that buying the Play Station 5, the Xbox X and S series or even the Nintendo Switch has become an odyssey. Experts say that the chip shortage will probably last until 2023.

The production of chips is among the most complex processes in existence, taking several months and hundreds of stages in its manufacture, in addition, it requires precision equipment that operates subatomic particles. For this reason, many companies have had to modify their infrastructure to meet the demand.

The TSMC case

Part of the semiconductor supply problems in the world are due to the fact that semiconductor manufacturing is led by a single company, Taiwan Semiconductor Manufacturing Company, Limited (TSMC), thus capturing a crucial technology for the world’s digital devices. TSMC accounts for 92 percent of global semiconductor production, while South Korea accounts for 8 percent. Taiwan is thus indispensable for powers such as the United States and China.

However, chip shortages caused by supply complications during the pandemic, coupled with Taiwan’s conflicts with China and the United States, foresee a possible advent of disruption in the international electronics supply chain. This would be catastrophic as it would limit access to chips that underpin military technologies, cell phones and medical diagnostic equipment, among many others.

Areas of opportunity

The United States and China are seeking to break their dependence on Taiwan. The US has persuaded TSMC to open a semiconductor foundry on its territory and is preparing to invest US$35 billion in rebuilding its domestic chip manufacturing industry.

Notably, the U.S. semiconductor sector is dominant in terms of research, development and design, accounting for nearly half of the global industry’s revenues with a value of close to $452 billion. The American superpower, however, has outsourced advanced chip production to Taiwan, a move it is now trying to reverse.

Meanwhile, the Asian giant is also investing in it (100 billion dollars) in subsidies, including the development of 60 new plants, with the difference that its industry has been lagging behind Taiwan’s for a decade.

On the other hand, between now and 2025, local and foreign companies plan to invest millions of dollars in Taiwan’s chip industry.