The Critical Role Semiconductors Play in the Global Supply Chain


A Look Inside the Semiconductor Shortage

Imagine going through life without your cellphone, computer, or vehicular transportation. It is hard to fathom, right? Our world is interconnected to the point that we rely on the internet and electronics for two of our most basic human needs: socialization and entertainment. We also rely on them to perform within society, whether at school, work, or when communicating data. Most of the products that we use every day are driven by semiconductors to power functionality. Without semiconductors, the Internet of Things and our world of wireless connectivity would not be possible, inside homes, businesses, or warehouses.

What is a Semiconductor?

Semiconductors are usually a solid chemical element or compound of substances that have special electrical properties which make it possible to serve as a foundation for electronic devices such as computers.  Semiconductors can conduct electricity under specific conditions but not others.

Devices and components of electronic devices that utilize semiconductor technology include computer memory, diodes, integrated circuits, and transistors. Use of semiconductors has enabled chip makers to produce electronic devices which are faster, smaller, and more reliable.

Semiconducting material can partially conduct electrical current between insulators (non-conductors) and conductors (usually metals).   The name “semiconductor” describes the fact that it has electrical resistance and cannot fully conduct electricity.  A semiconductor can be a pure element such as geranium or silicon or a compound, for example, cadmium selenide or gallium arsenide. Without semiconductor technology, products stemming from technology and machinery industries cannot be produced.

There are two types of semiconductors. Intrinsic semiconductors are chemically pure. Free from impurities, the electrical conductivity of intrinsic semiconductors is low. Extrinsic semiconductors are created through a process called doping. The process involves adding impurity to intrinsic semiconductors. The amount of impurities dictates its electrical conductivity. Two types of extrinsic chips exist, N-type semiconductors and P-type semiconductors.


Taiwan Semiconductor Manufacturing Co. (TSM) is the largest manufacturer of semiconductor chips. While Intel earns more revenue, TSM makes around 90% of advanced chips produced globally
Types of Extrinsic Semiconductors
N-Type Semiconductor – When a pentavalent impurity is added to an intrinsic semiconductor
S-Type Semiconductor – When a trivalent impurity is added to a pure semiconductor



What’s Behind the Chip Shortage?

The shortage of semiconductor chips has affected the electronics supply chain and consequently many other industries. In general terms, semiconductors are classified into smaller categories such as memory chips, integrated chips, and microprocessors.  Without semiconductors, items consumers typically purchase and use from televisions to electric cars cannot be produced. The reason that the chip shortage has caused disruptions to the entire supply chain is simple: chips are the building blocks of nearly everything electronic. If one chip in one appliance or device is not available, the manufacturing, shipment, and sale of that product is delayed. Products such as electric vehicles can need dozens of chips to operate. This means that the lack of one chip that costs less than $1 can prevent the sale of one item that is worth thousands.

Most semiconductors are manufactured outside the United States. The COVID-19 pandemic disrupted global supply chains and in turn, chip manufacturing was affected. Subsequently, global supply chains have been negatively impacted by the chip shortage. A lack of available workforce and rising geo-political issues has helped to exacerbate the chip shortages’ effect on each link of global supply chains.

After the pandemic, most commodities saw a drop in demand as factories shutdown. However, as consumer spending increased and companies began to digitize their supply chains, the need for semiconductors skyrocketed. There has never been more demand for semiconductor devices than there is currently. The advent of the Internet of Things and introduction of 5G technology has accelerated the demand for chips in interconnected devices such as computers & smart phones. This has created supply chain bottlenecks that experts predict will not be resolved soon.

Effects on the Automotive Industry

The automotive industry is the industry most financially impacted by the semiconductor chip shortage. In 2021, automakers lost over $210 billion in revenue. The automotive industry has not fared much better in 2022. The global semiconductor shortage has affected almost 3 million vehicles worldwide since the beginning of 2022 and is expected to reach 4 million by year’s end. North American automakers have been hit the hardest, halting production on over 1 million vehicles so far this year. In July 2022, two of the world’s largest automakers, Toyota and General Motors, reduced their monthly vehicle production by 50,000 and 100,000 vehicles, respectively. Other automakers are shipping cars to dealers without certain functions. Because of the semiconductor shortage, BMW was forced to ship customers’ vehicles without full electronic capabilities. Functions such as Wi-Fi and CarPlay were eliminated due to the company having to change chip suppliers.

The global chip shortage is also increasing the price of new cars. The end of 2021 saw the average price of a new car reach a record $47,202. In May 2022 that record was broken, with the average price increasing to $47,148.










What Is Moore’s Law?

Moore’s Law refers to Gordon Moore’s perception that the number of transistors on a microchip doubles every two years, though the cost of computers is cut in half. Moore’s Law states that it can be expected that the speed and capability of today’s computers will increase every couple of years, and that the cost will be reduced. Another tenet of Moore’s Law asserts that this growth is exponential.

The US semiconductor manufacturing capacity has dropped from 37% in 1990 to 12% today


China is the largest semiconductor manufacturer. It accounts for 24% of the world’s semiconductor production, followed by Taiwan at 21% and South Korea at 19%.


World Semiconductor Trade Statistics is projecting the global semiconductor market will increase slightly over 16% in 2022 and continue to grow by 5% in 2023.


10 Largest Chip Manufacturers (in terms of revenue)

  • Intel
  • Samsung
  • Taiwan Semiconductor Manufacturing (TSMC)
  • SK Hynix Inc
  • Broadcom Corporation
  • Qualcomm
  • Micron Technology
  • Applied Materials
  • Nvidia Corporation
  • Texas Instruments Inc.

Electronics Demand

The pandemic was the catalyst for a halt in global production across almost all industries. Lockdowns forced people to stay home and find activities to occupy their time. Many consumers began to purchase electronic devices to cope with the lockdown, however companies could not keep up with the increased demand. As technology advances, more industries are digitizing their operations and altering their products to electric components. This continues to contribute to the chip shortage, which is limiting the manufacturing and supply of electronic goods throughout the world.

Transportation Logistics

After lockdowns and restrictions from the pandemic eased, shipping ports began to open. One would think that this would be cause for celebration, however the reopening of ports was disrupted by an influx in cargo waiting to be delivered. Over the last few years, global supply chains have been experiencing bottlenecks at the ports. Bottlenecks are causing transportation constraints that are delaying not only semiconductor products but also semiconductor materials necessary for their production.

2022 and Beyond

Based on World Semiconductor Trade Statistics released in June 2022, the global semiconductor market was expected to reach $646 billion by year’s end, a 16.3% growth from 2021. It was forecast to increase by 5.1% in 2023, growing to $680 billion. New semiconductor research from the Semiconductor Industry Association shows that chip sales have fallen for the past six months. The largest drop was from 18% in May to 13.3% in June.

The market is currently forecast to reach only $615 billion, an 11% gain from 2021. Many experts see this as good for electronics supply chains because it implies that the global semiconductor shortage could soon be over. Other experts believe that the chip shortage is nowhere near finished. One reason is due to the war in Ukraine which is affecting exports of krypton and neon. These gases are necessary for chip production and Ukrainian companies produce over half of the world’s neon.

In addition, the recent slowdown of the Chinese economy due to COVID-19 restrictions is playing a role in decreased semiconductor sales across Asia. This is influencing the global semiconductor sales market. In South Korea, chip exports have slowed for four months in a row, falling from 10.7% in June to 2.1% in July. Taiwan has also experienced a slump in semiconductor manufacturing and exports, signaling an ease on the chip shortage.

Chip makers have raised prices between 5% and 15% in response to supply chain constraints and increases in business costs. The prices of analog and diode technologies have risen even higher, topping out at 25%. Prices are expected to continue to rise well into 2023. This is excellent news for the semiconductor industry. Over the last two years, it is estimated that companies collectively lost over $500 billion because of the chip shortage.

TSMC currently owns 28% of the global semiconductor manufacturing capacity and hopes to gain more. An Apple supplier, the company plans to increase investment and production to curb the shortage. Their partnership with Sony and the Japanese government will create a new fabrication facility to ramp up intrinsic and extrinsic semiconductor manufacturing by the end of 2024. They are pledging to spend between $40 -$44 billion to increase their ability to produce intrinsic and extrinsic semiconductors. Plans for factories in Taiwan and Arizona are currently underway. Other semiconductor manufacturers such as Texas Instruments and Intel are also ramping up production. These facilities are not anticipated to be ready until at least 2023, however.

The largest chip manufacturers in Japan, Sony, and Toshiba, have stated that the labor shortage is hurting their efforts to increase chip production.  Chipmaking requires highly skilled engineers that are trained to program and integrate chips into continuously advancing markets. Without ample engineering talent, the addition of fabrication facilities in countries such as Taiwan, China, and South Korea may not have the workforce to operate.

Governments across the world have also begun to push legislation forward that will increase semiconductor manufacturing. The United States Senate recently passed the CHIPS act which will provide $52 billion to semiconductor companies. Intel has announced that they will invest in a $20 billion facility in Ohio, with production to begin in 2025. The European Union is also planning to introduce their own version of a “Chips Act” as is South Korea, which pledged $450 billion to its semiconductor industry.


The global semiconductor chip shortage has been the catalyst to generate supply chain disruptions throughout the world. The combination of reduced supply of semiconductor materials and increased demand for semiconductor devices has led to product shortage and price increases. As the demand for chips rises, semiconductor companies and governments are in global competition for better strategic positioning. Experts predict that the shortage could last well into the end of 2024.


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5 Reasons for the 2021 Semi-Conductor Shortage (datexcorp.com)

Why Is There A Chip Shortage In 2022? (gadgetsnow.com)

What Is Causing the Global Chip Shortage in 2022? – We Buy Used IT Equipment

Global chip shortage 2022 – updates in June (power-and-beyond.com)

2022 Semiconductor Industry Outlook | Deloitte US

Unfortunately, the global chip shortage will continue | TechRepublic

The global chip shortage is forcing BMW to ship its vehicles without Android Auto and CarPlay (androidpolice.com)

Toyota trims July global production target amid chip shortages, parts supply disruptions – BusinessToday

Why The Chips Are Down: Explaining the Global Chip Shortage | Jabil

The average new car costs $45,000: What the heck is going on? – CNET

Deloitte: The end of the semiconductor shortage is near | VentureBeat

Semiconductors expected to be in tight supply throughout 2022 | Supply Chain Dive

Record-Level Semiconductor & Component Price Increases in 2021 (z2data.com)

TSMC’s revenues surge as it warns chip shortage will continue into next year – The Verge

CHIPS for America Act & FABS Act – Semiconductor Industry Association (semiconductors.org)

10 Largest Semiconductor Companies In The World – Zippia

New-Vehicle Prices Flirt with Record High in May, According to Kelley Blue Book, as Luxury Share Remains Strong – Cox Automotive Inc. (coxautoinc.com)

Global chip shortage continues amid inflation, rising rates and war: IDC (cnbc.com)

Global manufacturers see chip shortage easing | Reuters

Semiconductor Market: Slowing Chip Sales Heighten Fears of a Global Recession – Bloomberg

Recent News Release (wsts.org)

Difference between Intrinsic and Extrinsic Semiconductor (tutorialspoint.com)

North American Automakers Cut Production of 100K Cars This Week Over Chip Shortage (thedrive.com)



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