Chips with everything…

Did you know that what’s printed on the tubs of butter you buy at the supermarket relies on microchips to control the curing of the ink? You probably didn’t, but it’s true.  It’s a simple example that there’s ‘chips with everything’ in today’s world. While media headlines concentrate on how the global computer chip shortage impacts things like games consoles, cars, and smartphones, it’s worth remembering that the shortage has a much broader impact.   

It’s easy to believe that current supply woes are wholly caused by the pandemic, but that’s not the case, as many articles analysing the causes illustrate, see here and here , for example. US-China trade tensions are a factor, for example, and so are the decisions made by major corporates in some industry sectors when the pandemic hit.  On the latter, many swiftly cancelled orders with chip suppliers who understandably compensated by prioritising sectors where orders continued to flow. As current delays to new vehicle production in the auto industry illustrates, many companies now find themselves further down their supplier’s priority lists than they perhaps expected now that things are slowly opening up.   

The pandemic has, of course, had some direct impact, but rational and objective observers will conclude that the event has starkly exposed a serious consequence of the globalisation and extended supply chains that have become the norm over the last twenty or so years.  Over just two decades the number of key semiconductor fabrication companies has essentially reduced to just three, namely Taiwan’s TSMC, South Korea’s Samsung, and Intel. When the two Asian firms have more than 70% of the fabrication market from facilities centred in the Far East then we shouldn’t really be surprised when a disruptive event puts the supply/demand equation out of balance. There’s little doubt that many country leaders, politicians, and corporates will already be considering whether the developed world’s heavy dependence on globalised supply chains has gone too far. Global trade’s important, and it has been for centuries, but it seems likely that there’ll be some strategic retrenchment towards a better local/offshore balance in order to mitigate strategic risks over the coming years.

For years we’ve been told by health professionals that eating chips (fries) with everything isn’t healthy, and most people in developed economies are more informed today about the importance of a healthy diet than previous generations. Analogously, we need to appreciate that a life regimen that relies on ‘chips with everything’ for the goods, devices, appliances, and facilities we use every day in the modern world isn’t good for us either. Chips as part of a balanced diet or in a balanced every day life are, of course, perfectly acceptable, and so perhaps a shortage of computer chips isn’t such a bad thing if it helps us return to a better balance in the way we live.   

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