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"Never Seen Anything Like This" - $1 Display Chip Shortage Causes Chaos In Global Supply Chain

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by Tyler Durden
Friday, Apr 09, 2021 - 04:15 AM

A semiconductor shortage continues to wreak havoc on global supply chains of auto and tech industries. Semiconductor manufacturers produce hundreds of different kinds of chips. Intel, Qualcomm, and Nvidia manufacture some of the most expensive ones, ranging from $100 to more than $1,000, powering computers and smartphones. But the shortage is not with the most expensive chips. According to Bloomberg, the shortage is among inexpensive display driver chips that cost $1. 

A display driver chip is an inexpensive chip whose sole purpose is to communicate basic instructions for illuminating computer monitors, TVs, smartphones, smart home devices, among other things. The shortage of driver chips has made it remarkably painful for supply chains of auto and tech industries who have scaled back or suspended production of certain products in recent months due to their inability to source the $1 chips. 

The chip shortage was sparked during the virus pandemic. People were locked down in their homes under government order and were forced to upgrade their computers, adding more displays so they could work remotely. Their children were outfitted with laptops and tablets to learn at home. Households also upgraded their televisions to 4K, bought game consoles and other smart devices around their house during the pandemic.

At the same time, automakers were blindsided by the virus pandemic. They shuttered production lines and reduced orders of critical chip components with their suppliers. 

Now automakers like Ford, Nissan, Stellantis, BMW, Porsche, Volvo, and Volkswagen have warned or already started to scale back auto production because of their inability to source display chips. 

"I slashed all my projections. I was using the financial crisis as the model," said Stacy Rasgon, who covers the semiconductor industry for Sanford C. Bernstein. "But demand was just really resilient."

To make matters worse, cold weather in Texas in February knocked a decent chunk of US production. A fire at a Japanese chip factory in March forced production to shut down for a month. 

Semiconductor companies like Samsung Electronics and Taiwan Semiconductor Manufacturing warned they're both struggling to keep up with demand despite running factories at over 100% capacity. 

With these inexpensive display drivers in every consumer product with a display, the shortage of chips could lead to shortages of popular consumer goods such as smartphones, laptops, game consoles, and even entire automobiles, along with various appliances and smart home devices. 

"I have never seen anything like this in the past 20 years since our company's founding," said Jordan Wu, co-founder, and chief executive officer of Himax Technologies Co., a leading supplier of display drivers. "Every application is short of chips."

One striking feature of the semiconductor shortage is that it could hurt the economic recovery. Goldman economist Jan Hatzius told clients the chip shortage is not the only shortage

... and who would've predicted that an inexpensive display chip could be the root cause of the global chip shortage. 

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