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Chip crisis: The global economy is on a very fragile foundation

Global Chip crisis

The supply of semiconductor products seems to have stabilized a bit recently. A look behind the scenes, however, shows that entire branches of industry are basically moving on an extremely fragile foundation.

On the one hand, customers have now reduced their production to a level at which they can live with the incoming supplies for the time being, on the other hand, the chip fabs are increasingly providing stable supplies – albeit on a relatively low basis. So you’ve leveled off as best you can.

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However, according to a Washington Post report, the US Department of Commerce warns that this is a very fragile construction. Because buffers are simply not available. A relatively minor disturbance can be enough to shake the whole system again. Before the crisis, chip inventories were sufficient on average to keep production running for around 40 days if supplies were not available. Currently, the inventory at the manufacturers is more like 5 days.

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Intel Core i9 Alder Lake more powerful than Apple’s M1 Max chip, but less efficient

One disturbance is enough

That means, according to the Department of Commerce, that the supply chain needs to be running pretty well to avoid renewed disruption in various industries. It is not a completely unrealistic scenario that a larger chip factory in Asia could fail for two to three weeks or that there would be a similar disruption to transport routes. Then the inventories can quickly shrink and production capacities can run completely empty again.

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Accordingly, people were certainly looking at the developments that the massive volcanic eruption in Tonga had in their wake these days. Fortunately, there was ultimately no major consequential damage. The eruption caused a tsunami shock wave to run through two oceans, but it did not cause any major damage. But it could have turned out differently, which would have caused difficulties for the global economy in the current situation.

What do you think about the Global chip crisis ? Let us know in the comments.

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