Recovering From The Chip Shortage Might Be Harder Than We Thought

The coronavirus pandemic had disrupted the world economy and created a catastrophic supply chain shortage. Nonetheless, its most noticeable impact was experienced by the tech industry, specifically in backbone part manufacturers like semiconductor producers. Pretty much everything in our lives from smartphones to home appliances or from public kiosks to the transportation industry relies on integrated circuit chips for the functioning of these essential systems in our modern world. The biggest impact has been faced by automakers which has led to fewer finished cars out of the production lines leading to higher demands. Most manufacturers have had to produce cars without all the parts to prevent unbearable losses if factories remain closed due to the shortage.

Taiwan, one of the world’s largest chip manufacturers, has been on the front of normalizing production and supply. However, the island cannot bear the responsibility alone. In an interview with Reuters, Taiwan’s Economy Minister Wang Mei-hua had stressed the importance of Malaysia’s role on the road to recovery. As Malaysia provides services that Taiwanese firms do not, the squeeze was seismic as factories were shut down for the better part of a year.

Wang had said, “Malaysia’s help is needed to resolve the global shortage of auto semiconductors, especially when it comes to packaging”. Due to the complexity of the supply chain, Malaysia has returned to about 80% production capacity. The Malaysia Semiconductor Industry Association’s President had assured that major manufacturers were on full capacity production. However, the crunch will still be pervasive due to the high demand in the auto industry where cars have completed production but require key chips for the complete product. Malaysia is the major supplier to automobile giants like Toyota Motor Corp and Ford Motor Co.       

In recent developments, Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and Japan’s Sony Group are considering a joint chip manufacturing facility in Kumamoto, Japan. The plant’s main aim will be the production of semiconductors for automobiles, camera image sensors, and other major computing products to battle the global chip shortage. The facility which has a government interest in investing 800 billion Yen ($7.15 billion), is expected to begin production in 2024. Both TMSC and Sony have declined to comment on the recent progress.  

Co-written with Elisha Samuel