Posted On:

March 13, 2023


The Chip Supply Chain Chokehold

Semiconductors are integral to today’s modern world. Smartphones and computers are the most obvious objects that utilize semiconductors, but consider all manner of transportation, too. Cars, planes, trucks, and more rely on these materials to control and manage the flow of electric current.

The critical nature of these parts cannot be understated. Entire nations depend on the reliability of semiconductors. With that much at stake globally, it’s a wonder how the semiconductor supply chain is at the mercy of a handful of major manufacturers. As some industries begin to improve due to better chip access, others are still struggling to maintain positive growth.

In fact, the automotive industry is currently suffering from a hike in new car pricing and the inability to source semiconductors and other electronic components to produce new vehicles. According to the latest data released by the automotive industry data forecasting company AutoForecast Solutions, global auto production has been cut by about 304,600 million units as of January 29, directly resulting from the chip shortage.

It’s not just industries that suffer because of the chip shortage, but consumers, too. For instance, an article from Kelley Blue Book estimated the average new car sold for more than $49,500 by the end of 2022– almost 5% higher than a year before. Those who want to drive the latest and greatest model will have to pay a premium price for it.

All Eyes on Taiwan 

A single manufacturer in Taiwan, Taiwan Semiconductor Manufacturing Company (TSMC), supplies some of the leading technology firms in the globe with semiconductors. While Apple may design the chips specific for their needs, TSMC is one of the only companies that can manufacture them. And with the difficulty of building and miniaturizing semiconductors, each with a grid of millions or more transistors on a chip, all eyes continue to remain on TSMC and the like.

Domestically, the United States is attempting to invest in a failsafe to prevent a possible collapse of the chip supply chain. In August of last year, the CHIPS and Science Act was signed into law by President Biden on August 9. The act provides $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the U.S.

On top of that, Taiwan Semiconductor Manufacturing Company is in the midst of upgrading and expanding a new factory in Arizona. A $40 billion investment from the manufacturer- originally $12 billion, is aimed to help move the U.S. toward self-resiliency in the technology sector. Yet, the project is not without its own difficulties. In an earnings call in January of 2023, TSMC said the U.S. construction could be at least four times the cost in Taiwan, mostly due to labor expenses, permits, regulatory compliance and inflation.

The chip supply chain vulnerability remains on the shoulders of major manufacturers like TSMC. Should anything negatively impact their ability to produce these semiconductors that the world so heavily relies on, other global supply chains would be majorly disrupted. Despite efforts to decrease global apprehension and widen the access to semiconductors, it may be years before the chain fully stabilizes across all sectors.

Avoid The Chip Supply Chain Bottleneck 

The United States may need to seek alternative routes to keep up with the chip supply chain. Yet, it may be years before new plants are built domestically.

With the global economy so dependent on the semiconductor supply chain, it may be beneficial to find other avenues of sourcing critical components. Workflow operations critical to business success may be at stake, which is where major independent stocking distributors can help.

Direct Components, Inc., an industry leader in sourcing and delivering hard to find and obsolete parts for over 25 years, is here to help. With our in-house lab capabilities, we ensure that each and every electronic component is tested and of the highest quality.

Looking for a specific part? Submit a Quote Request today, and one of our industry-veteran support staff will assist you!

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Written by Aaron Nursey, Founder and CEO/President of Direct Components, Inc. The past two years have brought a unique set of challenges to businesses of

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