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The 2020-21 global chip crisis is an ongoing predicament that has disrupted more than 150 industries including health-care, power, finance, defense, transport, communications etc. At the crux of the problem lies the very simple fact that the demand for integrated circuits also known as semiconductor chips is way more than its supply. These chips are basically in every electric device from phones and computers to refrigerators, microwave and most significantly to cars. These tiny parts are modern marvels and they hold so much importance that their fall in supply may end up causing major economic disruptions. Brands like Ford, General Motors and Volkswagen have already suspended their production lines. Similarly, Nissan has stated that they will be making 500,000 less cars this year. Even the Apple CEO, Tim Cook has predicted a fall in sales of Apple products. This big little problem has been caused by various global disruption like COVID-19, US sanctions, Taiwanese droughts etc. and its repercussions are predicted to last for a while. It is crucial to understand how the Product Design Services will be affected as a result of this and the ways in which manufacturing companies can continue to keep bringing products to the market.
What caused the chip shortage?
The world shut down because of COVID-19 pandemic. The global lockdowns caused many factories to close with it leading to a lack of materials requisite for manufacturing of semiconductor chips. One of the primary components for mass production of chips is Silicon and its prices increased causing suppliers to further assume a passive approach towards chip manufacturing. The quickly worsening situation was compounded by a rise in drastic demand. According to Semiconductor Industry Association the Global semiconductor industry sales were $40 billion for January, which is an increase of 13.2% over the past year. The boom can be to great extent be associated with COVID-19 and its social distancing norms. In 2020 approximately 46% of people in UK had to work from home, which meant that they had to be equipped with desktops, laptops, mobiles etc. Even the fact that people were unable to step out of their homes investments in gaming, VR technology etc. amplified. All these products requires chips and the fall in supply and the simultaneous rise in demand lead to this situation.
Moreover, the China-US trade war also caused a further decline in the supply. In 2020 the United States placed a restriction on Semiconductor Manufacturing International Corporation (SMIC) which was china’s biggest manufacturer. This caused companies to look at other sources like Taiwan Semiconductor Manufacturing Company Limited (TSMC) and Samsung which was already producing at capacity. The gap between the supply and demand further inflated. With the COVID-19 and social distancing norms reducing the speed of manufacturing has increased to an extent but the backlog has trickled down to a situation that might take a period of time to stabilize.
How can Manufacturers and Product Designers tackle this situation?
The manufactures and product designers now must be realistic and rethink their manufacturing process so that they can continue to bring their products to the market successfully. Ideally the focus of product designers goes in the order of viability, cost reduction techniques and then they would consider stock availability. The current situation could end up causing a shift in focus. They could take the below stated measures:
1. Reassess your launch date and forecast your demands:
There are two direct ways to handle this situation. If the company can raise enough funds then they can choose to sit on their product launch for a small period. This would lead to cheaper parts and increased flexibility. However, if the product is already in the market then companies can access their sales based on prevailing external factors and determine their ideal demand. This allows them to plan in advance and order the supplies accordingly.
2. Plan for a Continued Chip Shortage
The ink has been spilled and it is improbable that in the remainder of 2021 and perhaps even 2022 the situation will change. The large companies have the ability to hoard stock and have already began stockpiling. The small companies on the other hand will have to plan around the situation. They can begin by vetting the critical components and their demands early in the process so that they can order the chips they require well in advance. They can also aim to partner with contract with manufacturers who can help with storage as well as have deeper and established supply changes.
3. Limit Early Prototyping:
Prototyping is a very crucial part of product design process. Once 3D Modeling Services have been utilized and a functioning virtual model is created the next stage would be to create physical prototypes that can test it. Early prototyping is generally a comprehensive process that has various modifications. In this situation where there is a lack of resources the company can reduce the number of prototyping especially at the early stages.
4. Change in design:
Finally, the company may look at changing their design to accommodate supply. For instance logic chips are more widely available than high efficiency boost converters which have a 65 week lead time. The substitution could be made perhaps depending on cost, quality effects etc. Even the components that are cheapest have to an extent been hardest hit. Going for a higher cost might ensure quicker time to market. Finally, another problem is the size. The chips available tend to be bigger. For instance 8-10mm components are harder to find than the 2mm ones. The small device plan may no longer be feasible on the same timetable.
Conclusion
CEO of chipmaker STMicro has stated that the shortage might end by early 2023, and if it won’t last that long it is at least projected to drag into mid-2022. That means that the manufacturers need to strap in for a long period of shortage and high-prices which might require rethinking and redesigning.