Genesis of shortage:
- After reaching its peak in 2011, the laptop market growth slowed down with the rise of alternatives such as smartphones and tablets.
- Then, the pandemic hit.
- People switched to work from home, children connected to schools through laptops, and get-togethers happened over video calls.
- This shift led to a surge in demand for laptops and tablets.
What led to the production anomaly?
- Manufacturers produce them as 200mm or 300mm wafers. These are further split into lots of tiny chips.
- While the larger wafers are expensive and mostly used for advanced equipment, the devices that were in high demand needed smaller diameter wafers.
- But the manufacturing equipment needed to make them were in short supply even before the pandemic began.
- Industry is moving in the direction of 5G and advanced communication, which requires expensive wafers.
- High consumer demand for low-end products, coupled with large orders from tech firms chocked chip makers whose factories were also closed during lockdowns.
- Separately, Russia’s invasion of Ukraine has strained exports of essential commodities used to make chip sets. Moscow supplies rare materials like palladium, and Kyiv sells rare gases to make semiconductor fab lasers which is used to make chipsets.
- When the pandemic began, carmakers stopped requesting chips from suppliers due to low demand for new vehicles. And now, as they ramp up production to meet consumer demand, chip makers are down on supply because they have cut deals with other industries.
READ MORE: Daily Prelims Booster
READ MORE: Daily News Analysis