Worldwide chip shortage leads to price hikes

A “chip shortage” doesn’t mean that Chip is slight in stature. No, it’s about those little specks of silicon that are the brains behind nearly all computing power on the planet.

Each year, engineers pack more power into these chips and each year, humankind becomes more dependent on them. Everything from autos and refrigerators to computers depends on a massive supply of these tiny devices.

So, what’s the problem? Thanks to Mother Nature’s lack of rain this year and unexpected events like the pandemic – where people work from home and demand more technology, the world faces major challenges to the chip supply.

Many of the best-known chips come from Taiwan, which manufactures a major portion of the world supply. During the chip-making process, water is used to clean the wafers (the silicon disks) before they are cut into tiny squares and mounted into packages.

Typhoon impact

Taiwan’s President Tsai Ing-wen said: “Taiwan did not experience a typhoon in 2020 and faces its most severe water shortage in 56 years.”

Typhoons typically produce huge amounts of rainfall, and Internet sources said the government set up an emergency response center to deal with the drought.

“Water is fundamental to the manufacture of semiconductors. Over a series of steps, semiconductors are built in layers on silicon wafers into integrated circuits (also called microchips). After each one of several dozen layers of semiconductors is added to the silicon wafer, it must be rinsed, requiring massive amounts of water and a great deal of energy,” according to the Internet.

Lack of fresh water plus major increases in demand for chips create shortages. Therefore, prices have increased dramatically.

Games

High-tech individuals demand ever-increasing power to run their graphics for games, AutoCAD, photo editing and everyday web surfing.

Most noticeably, the cost of video adaptors (cards) is increasing. For example, the most popular and sought-after Nvidia graphics card, the RTX 3090, has shot up in price from about $1,000 each to just less than $3,000. Every other card they make has experienced a similar price increase.

The consequence? Prices doubled for a game/workstation computer. Pre-configured computer prices have increased as well, but not as dramatically.

Chip shortages will likely continue for another year. So along with the higher prices for computers, auto manufacturers and others cannot build as many units as they would like. For all you amateur economist out there, it is just supply and demand.

William Claney is an independent tech writer and former owner of Computers USA in the Clayton Station. Email questions or comments to willclaney@gmail.com.