The Global Chip Shortage Explained


The Playstation 5, Sony’s heavily anticipated follow up to its hit Playstation 4 console, was released on November 12, 2020. Despite the time that has passed since release, many gamers have yet to get their hands on console. This is not by virtue of the Playstation’s pricing which, at $499 for the default model, is certainly not cheap, but not entirely inaccessible either. The main issue that gamers face when trying to acquire the new console is actually finding a store that has it in stock. Be it at brick and mortar stores like Target and Best Buy or online retailers such as Amazon, it seems nigh impossible to find the PS5 anywhere, leading to several questions. As it turns out, the issue involves the entire consumer electronics industry. Let us talk about the global semiconductor shortage.

What is the chip shortage:

To answer that question, we have to first explain what exactly a computer chip is and what it does. To put it in simple terms, a computer chip is a basic computer component that can perform all manor of tasks from controlling the brightness of the screen in your smartphone, to acting as a component in a CPU or GPU. Basically, what you need to know is that computer chips are used everywhere computers are found and for a plethora of different applications. In the modern world, computers and computer chips are found everywhere. Knowing this, let us take a look back at the past two or so years. Following the Coronavirus pandemic, the economy experienced a recession which saw countless companies adjust their sales predictions to compensate. Some of those 787 companies included automobile, computer, and appliance manufacturers. All of the aforementioned industries use computer chips in their production. As those companies projected lower sales, they cut down on orders of semiconductors from the large manufacturers such as Foxconn, TSMC, and Samsung. The semiconductor industry is dominated by a few big players and many of the companies that design their own chips outsource manufacturing to those companies. As a result, those companies ramped down manufacturing of semiconductors due to lower numbers of orders. However, unbeknownst to many in the industry, the sales of products that require semiconductors would go up and not down. During the pandemic, many people began to purchase computers and other products necessary for remote work all of which required semiconductors. Unfortunately, as a result of semiconductor manufacturers ramping down supply there was little to go around. This in combination with Trump’s trade war with China and little diversity in the semiconductor manufacturing industry created the problem we have today. This is why it is so hard to get a PS5. You are not just competing with everyone who wants a new PS5, you are competing with car buyers, laptop purchasers, and people who want a new washing machine.

How does this affect me:

Well, obviously if you want to buy a PS5, the chip shortage is going to make it fairly difficult for you. In addition, the prices of consumer electronics, home appliances, and even cars are going to go up a significant amount. Current estimates state that the chip shortage is far from over and will probably last for a long time even after the pandemic is over. So unfortunately, you might have to wait a bit longer for your new console.