Understanding the Global Chip Shortage

As supply shortages continue to affect almost every industry, nowhere is that pressure more severely felt than in the technology sector and its dependents. Companies like Apple and General Motors have stated that the chip shortage has and will continue to impede their operations and increase prices, while the newest gaming consoles and graphics processing units continue to be in limited supply. So, how did this happen, and what is the solution?


Semiconductors

Semiconductors are circuits found in a variety of computers, machines, and other appliances. Due to their size, which is measured in nanometers, special instruments along with skilled technicians and large sums of capital are required to build these parts. Some chips take anywhere between 50 to 100 days to complete. Because of the inherent complexity of semiconductors, there are only a handful of foundries in the world that can produce them. With factory shutdowns and delays from the COVID-19 pandemic, these manufacturers are struggling to maintain output.


Taiwan Semiconductor Manufacturing Company

The largest producer of semiconductors is none other than Taiwan Semiconductor Manufacturing Company (TSMC), which leads other semiconductor fabricators in both market share and revenue. Not only are they the largest, but they also make some of the most sophisticated chips available, providing hardware for the iPhone and even the Lockheed Martin F-35 Joint Strike Fighter. TSMC currently operates nine fabrication plants in Taiwan, two in the People's Republic of China (PRC), and one in the United States. Because of rising geopolitical tensions between the PRC and Taiwan, policymakers in both Washington and Taipei have expressed concern that such an important supplier of the world’s semiconductors is in a dangerous operating environment, both politically and physically. Decentralizing TSMC’s factories not only increases company value and redundancy, but also strengthens the West’s secure supply of these important circuits.


On May 14, 2021, TSMC announced its plans to build a fabrication plant in the United States. As multiple pundits and politicians have noted, the Arizona foundry will bring some chip manufacturing back to the United States, bolster the American economy, and improve overall national security. Advanced foundries on American soil enable the U.S. to be less dependent on overseas semiconductor manufacturing, while securing a steady supply of semiconductors for both business and military applications.