Why Are All My Chips Out of Stock Right Now?

From simple phone chargers to highly sophisticated super-computers, semiconductor chips are to be found everywhere. These tiny devices run our phones, computers, laptops, TVs, cars, and machines without us even noticing them. With this level of dependency, a disruption in the supply chain of semiconductor ICs would be catastrophic for the world economies and individual businesses.

2020: A Nightmare

2020 is the year that will always be remembered in history for chaos, fear, and disruption. The tiny little virus that started spreading from Wuhan soon took over the entire world by storm. Not knowing how to deal with the situation, most governments resorted to unplanned lockdowns. The closure of businesses, transportation, and social activities not only created an atmosphere of panic and uncertainty but also disrupted the supply chain networks at a massive scale.

Causes of Chip Shortage

For the entire first half of 2020, almost all the major chip-producing countries (China, Taiwan, Hong Kong, and Korea) were either in lockdown or under heavy social restrictions. This meant the closure of factories and shipping ports. Resultantly, the shipment of ICs and electronic components immediately came to a halt.

The most obvious factor is the soaring demand for electronics products. Being under social distancing restrictions, most people are resorting to their TVs, phones, consoles, and computers for entertainment and socializing. The growth projection of consumer electronics for the first quarter of 2021 is around 12%.

The second cause is phantom demand — an artificial increase in demand due to hoarding and stockpiling. Tech giants like Huawei, Samsung, and Apple have been accused of hoarding chips in large quantities. Suppliers and manufacturers of chips in Asia are also holding back their stocks in hopes for higher returns.

Long-term factors like Industry 4.0 and the rise of electric and autonomous vehicles are also fueling the crisis. Electric vehicles incorporate multiple highly sophisticated electronic sub-systems which consume a significant percentage of manufactured chips.

Another major reason is the international geopolitical situation. Many Chinese companies have blamed the US government sanctions for this crisis, arguing that the uncertain situation has driven manufacturers to stockpile.

How to Manage Your IC Inventory and Remain Crisis-Proof

Parts before PCB: If you are about to assemble a newly designed PCB, make sure to order all parts on your BOM before heading for PCB production. If the components are out-of-stock then the PCB design can be modified and alternative components can be sourced.

Inventory: Order the most frequently used components (especially MCUs) in sufficient quantities so that you don't run into trouble under uncertain circumstances.

Datasheet Websites: Take advantage of component sourcing websites like octopart.com and oemsecrets.com for searching alternative suppliers and distributors.

Alternative Parts: If a required part is unavailable, check datasheets and distributor websites for alternative part numbers of the same chip which might refer to earlier versions, different device packages, or different temperature ranges.

Conclusion

The global pandemic has severely affected all areas of life including business supply chains. Multiple reasons have contributed to this crisis: soaring demand, hoarding, increasing automation, and US-China relations. Only by addressing the logistics, technical, and policy issues can such crises be dealt with effectively.