The autarchy of the microchip

More and more countries are running for cover to produce their own microchips and thus circumvent the global shortage that is putting enormous power in the hands of the few manufacturers. Semiconductors are crucial in a large number of products. From commonly used electronic devices such as smartphones and tablets to video game consoles, from household appliances to alarm clocks, up to cars. The automotive sector has been the one that has so far suffered most from the crisis, but now the effects are beginning to be seen also in the other areas of application. The crisis was caused by a mix of factors. The onset of the pandemic had led some producers to decrease their forecast quantities, imagining a contraction in demand. At the same time, demand has not only not decreased, but has actually increased to unprecedented levels given the worldwide closures and the very high demand for electronic devices for smartworking and leisure. “The biggest problem in my view is that new supplies are hard to come by, and the increase in demand doesn’t seem set to stop,” said Timothy Uy, associate director of Moody’s Analytics. “Companies are trying to adapt on both the demand and supply side, and so are many governments who see the problem in some sense as a matter of national security.” Also because, according to estimates, the microchip crisis could last at least until 2023. South Korea, for example, has announced a $ 450 billion program allocated between now and 2030, including investments in companies and important tax deductions for make their producers more competitive. China has also set up a multi-billion dollar national fund to try to keep up with the likes of Taiwan, Korea and the United States. And the United States, for its part, has approved a law that allocates, among other things, 52 billion dollars to finance research and the production of microchips, and so is the European Union preparing to do so. Government involvement, according to Moody’s Analytics, could help level the playing field, easing the effects of the crisis with the long-term effect of making semiconductor manufacturing more widespread and cheaper, while it is now in the hands of a few large companies. that dominate the entire supply chain. The current microchip manufacturing process, in fact, requires rather long times and investments, and requires long-term planning for both production and distribution. And factories prefer to focus on the most modern and profitable chips, a choice that has made itself felt heavily in sectors that use older generation semiconductors such as automotive. It is precisely on this typology that governments should focus with their incentives, in the world to make up for the lack of basic microchips that is creating difficulties and risks paralyzing entire branches of industry globally.

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