“Inflation and the Finite endgame.” Global computer chip shortage. Will it lead to an analog retrofitted future? (Part 1) Posted on June 9, 2021 (A.Glass)
“Inflation and the Finite endgame.” Global computer chip shortage. Will it lead to an analog retrofitted future? (Part 1)
(15 weeks and climbing for new computer chips. Image: Bloomberg 2021)
When the COVID-19 pandemic hit the world globally in early 2020 it not only shutdown supply routes, it also halted production of computer microprocessing companies in both South Korea and Taiwan, crucially important to the semiconductor supply chain, these industries that develop technological products all went into quarantine, while demand for laptops, smart phones, computer games rose significantly throughout the global lock-downs of 2020. Yet, although the pandemic was the precursor that set off this shortage, the shortfall of semiconductors have also been due to other factors such as industry competitors from America, Japan and China in their variants of a price war, who have all invested heavily in the development of creating chip processing factories, which in turn have created a supply lag in pushing out new products. As it takes 3 years to build a state-of-the-art chip factory at a price tag of $10 billion, these newer factories are now becoming far and few between and the current trade war with China hasn’t helped the situation either.
While America holds a monopoly on computer technology, it does not with manufacturing, from IMB to Apple, most computer components are made offshore in either China or other other parts of South East Asia. With U.S. maintaining sanctions on Chinese companies, particularly their technological sector and in some cases have been delisted from American share indexes, this in turn has caused China to stock pile and amass computer chips, including used chip making machines from Japan, driving up the prices of second hand microprocessing machinery, which is now selling at a premium to Chinese owed tech companies. Further pressuring the price of computer chips globally and also the machines that create them, evident of the spending power that China has in stockpiling technology, in the shadow of escalating sanctions with America. China’s rush into trying to create its own self sufficient chip industry, with the costs of buying up huge amounts of semiconductors and 2nd hand machinery that produces the tech, will also affect the manufacturing slowdown simultaneously crimping development in microchip technology. Contributing to the increases in price which will continue to manifest from the global scarcity of microprocessing power.
As everyday technology will become more expensive for the consumer, so will the more advanced computer chips which are used in various applications. At this point in time the car industry has been the most effected by the computer chip shortage, from 2000 onward electronics in cars has risen from 18% of its manufactured components to 40%, assisting the overall performance of the vehicle from everything from transmission controls to entertainment systems. This almost total reliance on chip technology for the automobile is now at a metaphorical crossroad, while consumers are now spending big from stimulus payments and cheap loans, the demand for cars has risen and so has the postulation sell points of these technological advanced vehicles. With supply and demand distorted via the global pandemic and an over juiced market, which has been predominantly the main issue of supply chain shortages, buyers of cars are preprepared to spend between 8 and 20 percent over the ‘sticker’ price whilst a collapse in the manufacturing of chips has creating an overall price hike for the car industry, so far consumers, who are cashed up from COVID-19 stimulus monies – are prepared to match the price. This hyper-consumption may inevitably spiral over into other electronic industries. If the car industry tries to negotiate microprocessors, via political pressure, away from competing industries such as cell phones and computer game makers, we may see what is called the so called bullwhip effect that could spark hyperinflation on, as an example, cell phones. Thus potentially pricing newer everyday tech out of the market all together. Could this all be a prelude to the collapse of the digital world?
And it is Taiwan that might just end up tipping the whole computer chip market into this unsustainable collapse, feeding over 50% of its microchips to the American consumer, it is not only been heavily effected by a global pandemic supply shock and geopolitical tensions with China, but also the changing climate that might herald closer to the endgame. The microprocessing industry uses an incredible amount of water and Taiwan is facing its worst drought in over 56 years.
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Authored: A.Glass 2021
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