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The microchip crisis: How will it affect the video game industry?

3 min. reading
Gaming and eSports / 2 August, 2021

Sofía R. Ustáriz Journalist

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The pandemic of 2020 and 2021 brought multiple consequences to society, one of them being the changes in habits and activities that affected millions of people. Quarantines in different countries caused a significant increase in the consumption of electronic devices and online activities such as video games.

In order to access these, electronic devices that have many internal components are required, thus breaking down several manufacturing processes, making this industry considerably large.

Like any technological issue, innovation is a key aspect to keep the public interested and the constant launches of new products is one of the aspects by which this industry is constantly evolving.

Video games called to be the sports of the future

Video games called to be the sports of the future

eSports tournaments take place as in conventional sports; they bring together renowned players of each video game, use stadiums to play the games and there is a massive sale of tickets, as well as an audience that watches directly from their homes.

The crisis of microchips

For several years now, there has been a difficulty in adequately meeting the demand for chips, reaching its peak during the pandemic, when changing consumption habits marked a new era for various industries, including that of video games.

Years ago, it was observed that large companies had to change their infrastructure to meet their demand, becoming their own developers. This shows how this crisis has been unfolding over the years. Part of the importance of this crisis lies in the number of industries that can be affected by not being able to meet demand.

In the modern world, where technology feeds almost every aspect of society, maintaining attention with new launches is vital and today, demand can be said to outstrip semiconductor supply.

However, this shortage for the video game industry can lead to considerable financial losses.

 

Impact on the video game industry

The video game industry feeds on multiple branches that come from the vast technological environment. While currently the vast majority of games are online, the teams to access them face this shortage which significantly affects innovation in the devices.

This situation affects devices no matter which company creates them. Whether platforms like Xbox, PlayStation, Nintendo or computers made up of high-end teams from companies like Nvidia, Razer, AMD, etc.; it is a fact that the microchip crisis has reached the point of delaying launches and generating financial losses in all stages of production.

Those games that require high-end equipment are being affected at the sales level, as they do not have the desired audience, as a direct consequence of having limited access to the necessary equipment.

This situation may result in a pause in the gaming industry, as a way to mitigate the financial impacts of having limited access to state-of-the-art equipment.

 

Responses to the microchip crisis

One way that several companies have had to deal with the situation they are in is to start manufacturing their own microchips. This change requires multiple elements, such as establishing factories, production lines, qualified personnel, among others.

Therefore, this response may be long-term, but it is not an immediate solution, which generates concern for large companies that see their production limited.

 

Monopoly of production

An important aspect to bear in mind is that microchip production is focused on Taiwan and South Korea. According to TM economist Lombard Rory Green, 83% of the world’s production of processor chips and 70% of memory chips are produced by Asian nations.

Therefore, a possible solution to this shortage is to motivate the production of these elements in other countries to diversify the market and increase supply.

While this solution requires considerable investment from multiple parties, it will also prevent it from happening again in the future.

 

The role of investors

As to how the investor can be part of the solution, it is important to note that their involvement is of vital importance in solving the problem.

Having the right investment can make a difference for a company that has financial losses due to lack of microchips or is victorious in the current situation.

 

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