Cost of computer chip crisis to world growing: Turkish expert

ISTANBUL-Anadolu Agency

The most obvious effect of the global computer chip shortage on end-users is that prices will increase due to the deterioration of the supply-demand balance, and this increase has already begun, according to a Turkish expert.

Hakan Doğan, an associate professor with the Electrical and Electronics Engineering Department at Istanbul Medipol University’s Faculty of Engineering and Natural Sciences, told Anadolu Agency that although the chip crisis is being felt more intensely in specific areas such as the automotive industry, it is also being felt in areas such as smartphones, game consoles and electrical energy converters.

According to Doğan, in addition, there would be effects such as the unavailability of products or long production times.

“Companies are delaying more advanced versions of their products and will make do with the products and chips in their inventory,” he said.

Noting that the crisis is not limited to a specific product range or electronics field, Doğan said: “The main reason why it is felt more in the auto industry is that production slowed down at the beginning of the [coronavirus] pandemic as a result of car manufacturers reducing and canceling orders, thinking that demand would decrease, but demand remained high in real life.”

Pointing out that there are many reasons for the crisis, Doğan said one of the important ones is the spread of working from home due to the coronavirus, and for this reason, the demand for computers and other consumer electronics solutions.

Mentioning the disagreements between the U.S. and China, Doğan said that due to the political crisis between the two countries as well as the U.S. ban on Chinese origin chip-makers such as SMIC, users turned to Taiwan and South Korean manufacturers such as TSMC and Samsung and the already high occupancy of these manufacturers has caused supply to not meet demand.

“For the same political reasons, Chinese-based technology companies increased their demand before the bans started and tried to fill their chip inventories,” he said.

“This again made chip supply unable to meet demand. The drought in Taiwan in recent years and the use of too much water in chip production have also caused production to slow down,” he added.

‘Crisis will be resolved with proper planning’

According to Doğan, the problems in the chip crisis will be resolved in one or two years, but to solve the crisis, there is a need for new investments to meet supply.

Noting that new investments have already started, Doğan said U.S. chip maker Intel plans to spend $20 billion to build two production facilities.

“This crisis will be resolved with proper planning,” he said. “The only question is how soon this solution will mature.”

“The chip crisis will pave the way for the demand explosion rather than putting the technology companies into crisis. In addition, this is proof of how important and wide open the sector [is for development].”

Pointing out that the chip crisis may have an indirect impact on the academic world of science, Doğan said: “Small amounts of production are made in academic studies, since prototype production or proving the idea is more important than mass production, and the impact will be low in this respect.”

“However, since the contribution and support of companies in academic studies are great, fluctuations in company income expenses may be reflected in academic activities,” he added.

Global chip crisis

The change in the chip supply-demand balance due to the global COVID-19 pandemic and the drought in China, the largest producer of silicon, the raw material of chips, brought the chip crisis to the agenda in many technology related sectors.

According to the latest data from U.S. consulting firm AlixPartners, the damage caused by the chip crisis in the automotive industry is estimated to be $110 billion for this year. It also said that production of 3.9 million vehicles will be lost due to the crisis.