The worldwide chip shortage may be about to get even worse

24 Feb 2021

Image: © Andrii Zastrozhnov/Stock.adobe.com

As a drought in Taiwan has led to water shortages and restrictions, the country’s chipmakers could face bigger challenges amid the global shortage.

While the Covid-19 pandemic has sparked a global chip shortage, manufacturers in Taiwan have been hit with a new challenge as the country’s drought brings water supply restrictions.

According to Reuters, Taiwan chipmakers are “buying water by the truckload” for their factories in preparation for the continuing water shortages.

Taiwan is a key hub in the global technology supply chain, with companies such as Taiwan Semiconductor Manufacturing Co (TSMC) and United Microelectronics. Reuters reports that the country has already received requests to help bridge the gap of auto chips from other countries including the US and Germany.

The crunch is being severely felt within the auto industry at the moment, with car makers expected to lose $61bn in sales from pandemic chip shortages. Speaking to CNBC this week, Porsche chief executive Oliver Blume said the semiconductor topic is “very serious” because it affects the whole industry.

“We could be affected every day, so we watch very deeply [over] the next days and months what we can do.”

The shortage could also start to affect consumer electronics such as smartphones and games consoles.

Unsurprisingly, the global shortage has pushed chip stocks to record highs and analysts expect that the shortage will continue at least through the end of the year as the pandemic pushes the demand for digital even higher.

Reliance on a few key businesses

Earlier this week, Siliconrepublic.com editor Elaine Burke discussed the knock-on effects of outsourcing fabrication plants, or fabs, citing Intel’s recent struggle to meet demand and the possibility of outsourcing manufacturing to TSMC.

“This ecosystem means that businesses all over the world are heavily reliant on a few key businesses to deliver their chips,” she wrote. “The flaws in this concentration of computing power production are now apparent, and many countries and regions are keen to enter the chip race or accelerate their performance.”

A reliance on manufacturing in Taiwan means that the country’s current drought may have serious ramifications for an already stretched chip industry.

Chronic water shortages have often been a problem in Taiwan, with droughts steadily getting worse over the past 50 years, according to the government’s National Science and Technology Center for Disaster Reduction.

Jenny Darmody is the deputy editor of Silicon Republic

editorial@siliconrepublic.com