Disclaimer: This article is not a professional analysis of the current market situation. I am just a high schooler who enjoys researching about market finance even though I may not thoroughly understand it. All facts claimed in this article are subject to biases and can be misinterpreted. This article should not be used as a basis for researching about any investments you plan to take. It is just my view of the market. Please take everything stated here with a grain of salt.

---

Worldwide, the tech industry has been met with a crisis. Want to buy the new PlayStation 5? Unlucky, it is out of stock. Want to buy the new nvidia geforce rtx 3090? Well, it is either out of stock or the cost price is massively inflated. Want to buy the new iPhone? Unlucky for you it is extremely overpriced - Oh wait never mind, this is not related to the chip shortage. You get the gist. What is even more surprising is the fact that it is not just tech gadgets strictly that has been infected with this disease. Even the automobile industry took a hit. Want the buy the new 2021 Ford edge? You must really be out of luck because your local dealerships most probably don't have any in stock or they are modified so that they are fitted with very limited infotainment system.

---

But why the shortage

The answer to that question is not really that simple. We have to look at the supply chain of some of the chip suppliers in the industry. What appears is that it is not just the covid 19 global pandemic that is to blame but a decade worth of other small problems which built up over the years and it just so happen to burst due to the pandemic acting as a negative catalyst.

Because of covid 19, a lot of the workforce and education system shifted online, resulting in an increased demand for laptops, mobiles, web cameras, microphones, and many more electronic gadgets. However, not everyone was busy with work and education. A good portion of the population were graduates who just finished their school or education and looking to get some jobs. But because of the pandemic, unemployment rate shot up and many fresh graduates decided that instead of painstakingly searching for a job in a damaged market, it was probably better to take a year or two off for themselves. But what to do during a year off? Obviously, they could not get out, travel, and explore the world so they had to resort to something else. You probably guessed it by now but it is engaging in computer related activities. Such activities can include but not limited to gaming, streaming, graphics designing, programming, freelancing, photography-ing and many more. These activities often require high powered graphics cards like the rtx 3090 so demand went even further up.

If we look at some of the major chip manufacturing companies, we can see that even though they design their own unique silicon chips, except for one all the companies ship their design to a mutual company in china for the actual manufacture and production. With the exception of Intel, the six other major companies which are Sony, Apple, Microsoft, Qualcomm, Nvidia, and AMD have their chips manufactured from Taiwan Semiconductor Manufacturing Company or TSMC. As a result, should there be any rise in demand, TSMC must be the one to adjust or suffer.

Furthermore, it is not just the tech companies whose supply chains are hampered, but even automobile companies are facing the same issue. Both Ford and General Motors (GM) announced that they had to cut down on production because of the lack of silicon chips for their cars. As a result, they are unable to meet their demands, pumping up their market prices. On the other hand, this is not entirely just the pandemics fault. These car manufacturers often follow a model called "just in time" supply where they do not keep any extra parts, only enough parts to meet their monthly or quarterly productions. This is a traditional practice introduced by Toyoda himself which manufacturers around the world adapted. All it took was a global pandemic to expose it's weakness

---

What is the solution

Quite unfortunately, the only real solution to this problem is to play time. Economic experts estimate that the shortage could last up to early to mid 2022 and the only way to mitigate this damage is to let the market do its thing. Now a very enthusiastic researcher like yourself might ask, "why not just build more factories?". Quite frankly, it is not that simple. Silicon chip manufacturing, unlike those of others, is a very tedious process. Chips have to be stored in sub zero temperatures and developed in extremely fragile environment. Equipments which help achieve these are also quite expensive and take a lot of time and testing to develop themselves. In addition to that, obtaining a license to manufacture silicon chips is not exactly "easy" so we can not rely on newer business to help in this shortages. Yes, factory expansions are underway to match the demands, but that is the best that can be done. And as luck would have it, such expansions are not something which can not be achieved with the snap of a finger - they require time.

---

But above all the challenges faced by these manufacturing companies, we have to consider how the global pandemic slowed down a lot of the supply chains. Shipping containers arriving in some of the busiest ports around the world are put on halt for weeks before they can dock at the station. With all things considered, we must encourage ourselves to entertain the idea that perhaps we must look into technological solutions which do not require silicon chips. As horrid as it may sound, it is only a matter of time before we explore other possibilities.