The shortage of a few dollar chips causes a worldwide crisis in electronic devices

Just as a container ship across the Suez Canal is enough to undermine global trade, a one-dollar chip can be enough to slow down the whole market for the most modern devices, from consoles to video cards passing through cars rich in electronics and telephones. .

There are many chips in the products we use every day and which preside over many important functions, some cost a lot and are the result of years of research, others are extremely common components and can cost at most a dollar or a little more, and it is precisely the lack of the latter which are slowing down many sectors.

According to an analysis by Bloomberg, in fact, the shortage of PlayStation 5, Xbox Series X and many other devices could be attributed to the lack of display driver chips. What do these chips do? They are the ones who translate the instructions of the other components into the image that is shown on a monitor, on the screen of a telephone or in that of a navigation system. If they are not there, everything else makes no sense, and factories stop or slow down, production plans are revised, balance sheets shortened, shares sold.

The same goes for the chips that manage the power inside a device. It is a trivial concept but if there is no component that explains to the battery energy what to do everything else, even the most expensive and refined component, it is useless. It is like having all the energy of a power plant but without a switch to turn on the light.

How did we find ourselves in this situation? According to Bloomberg, it was partly bad luck. Accidents in essential factories in Asia and production stoppages due to blackouts in Texas have crippled production that was already too low to meet growing demand, with companies now at the physical limit of production. But the problem was also having totally misunderstood market trends during the pandemic.

With the slowdown in work rates, the employment crisis and people locked up at home, it was expected that consumption would also slow down. Instead, the lockdown has led us to spend more to feel better at home and meet the needs related to work and distance learning. This means new computers, new televisions, new consoles, new appliances of all kinds. And although the automobile market initially slowed, many later preferred the car to public transport for fear of contagion, resulting in an upward rebound of the entire sector and demand for components. So the factories had initially slowed down production and had to start again at a high speed but without those who needed it having stocked up.

The most difficult point of this situation is that any new production plants need time and could bring benefits only in the long term, but above all that no one wants to build them because they would not be economically advantageous. The only solution is to wait for a stabilization of demand, which will take several more months, while companies continue to burn billions.

Apple’s production also appears to be jeopardized by the global chip crisis: the next MacBook Pros and iPads expected in April are likely to suffer delays, or will be initially available in limited quantities.