Microchip Shortage Ravages Tech Industry, Stalls Tesla

The rubber-band effect of Covid-19’s tech craze is hitting back hard this year. Extensive consumer purchasing of laptops and other home-based electronics has struck the industry in such a way that has left it short of an essential component for all modern electronics: microchips.

Sony and Microsoft were both dealing with this shortage as they attempted to supply the demand for their new video game consoles this past November. AMD has been struggling for some time now to deliver both of the console’s custom CPU and GPU microchips, and they don’t expect that shortage to change until at least mid-2021. This made for a tough holiday season, especially with the rise of scalpers looking to make a quick buck on the elusive hardware.

Home electronics aren’t the only thing affected, however, as it seems that the automobile industry is taking a more significant hit. Since the beginning of 2021, General Motors has cut down numbers in the production of their vehicles and will now extend those halts until the middle of March. Ford, Honda, and Chrysler have all met similar fates, having to slow production on their vehicles, as well.

Tesla is the latest company that has been forced to shut down due to the shortage and will be shutting down their Model 3 production line in Fremont, California for two weeks. Each Tesla vehicle is made up of over ten thousand parts, and while some are made in-house, there are plenty of parts made by outside suppliers. If any of those externally supplied parts are missing, then the entire vehicle production line is halted.

There are many different computer components and microchips used in the vehicles, but most importantly for most consumers is the ability of the Telsa to self-drive itself, a chip made exclusively by Samsung. Due to the cold temperatures shutting down most of Texas, Samsung made the difficult decision to shut down its semiconductor plant in Austin, which likely resulted in a halt in Tesla’s production line.

Tesla documented the challenges in their annual fiscal 10-K report:

“Unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters such as the March 2011 earthquakes in Japan, health epidemics such as the global COVID-19 pandemic, trade and shipping disruptions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational. For example, a global shortage of microchips has been reported since early 2021, and the impact to us is yet unknown. The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products. Moreover, significant increases in our production, such as for Model 3 and Model Y, or product design changes by us have required and may in the future require us to procure additional components in a short amount of time.“

President Biden signed an executive order this past Wednesday for a 100-day review of the semiconductor supply chain, to assist in assessing a way to handle the shortage. After 100 days, the reports will be submitted by the Secretaries of agencies such as Commerce, Energy, Defense, and Health and Human Services. The intent is to help locate more resilient supply chains and attempt to secure “.. built-in redundancies, adequate stockpiles, safe and secure digital networks, and a world-class American manufacturing base and workforce.”

Hopefully, this order isn’t “too little, too late,” as the impact on the tech industry seems to be widening, not shortening, and a more than 3-month study will do little to assist those companies that are already limping through production. Unfortunately, there’s only so much we can do with our dependence on foreign companies to supply the components that make our products run being at an all-time high. Only time will tell the shortage’s true impact on the industry, but at least the US government is looking for ways to assist the process.

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