what are these electronic chips, the shortage of which is disrupting the world economy?

Semiconductors are to electronics what petroleum is to industry: an essential, but often invisible, component found in computers, video game consoles, smartphones, televisions, cars, airplanes, etc. washing machines, air conditioning temperature sensors, solar panels, etc.

But demand for electronics of all kinds has increased dramatically since the start of the pandemic, between the rise of telecommuting and home entertainment. In corporate IT, spending on cloud infrastructure (cloud computing) has soared. Gradually, all the objects of our daily life are becoming digital, from the coffee machine to a simple door.

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The planet has been so greedy in electronic chips, that these precious materials are now experiencing a shortage which is slowing down certain industries such as the automobile. On Friday 22 October, Renault announced that it was anticipating a loss of production “Close to 500,000 vehicles over the year”, due to the semiconductor crisis.

Manufacturers are belatedly experiencing a crisis that the technology sector has been going through for several months, steeped in both economic and geopolitical issues. Explanations.

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  • A complex manufacturing process

To put it simply, semiconductors are materials that sit between a conductor and an insulator: they manage and control the flow of current in electronics. They are often made from raw materials like silicon and germanium, gallium arsenide or silicon carbide.

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Their production remains a complex process: according to AMD, designer and seller of microprocessors, “It takes years of research and development to design, develop, produce, market a range of semiconductors”. For their manufacture, sand must be treated, purified and liquefied at 1700 degrees to obtain silicon ingots, which are then cut. in wafers (“Wafers”), very small silicon wafers.

With globalization and to lower costs, the players have almost all specialized in one part of their production chain: in design patents (ARM), in design and sales (Qualcomm, Nvidia, Broadcom), in manufacturing (TSMC, Global Foundries). A few rare companies still master the entire chain, such as Samsung and Intel, but also the Europeans STMicroelectronics and Infineon. All do not produce the same type of components and some, like the Taiwanese TSMC, are hyperspecialized in chips in high demand, making their manufacture even more strategic.

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  • A rapidly growing market

Semiconductors are an almost continuously growing market: in 2020, it represented 442 billion dollars (380 billion euros, + 5.4% compared to 2019) and should continue to grow by 17.3% in 2021.

Demand is driven by several markets: that of memories which allow information to be stored; that of smartphones and their infrastructures with the deployment of 5G; that of the automotive industry (electric cars, autonomous cars, control of airbags, safety distances; control of the engine, the battery, “start and stop” system, air conditioning, etc.); the entertainment industry, with the best-selling game consoles (Playstation 5 and Xbox Series X); the’Internet of Things (“Internet of Things”, or IoT) which allows objects to exchange information and communicate with each other; artificial intelligence and big data, with specific processors, like Intel’s Xeon Ice Lake.

  • An issue of technological sovereignty

The construction site of the semiconductor plant that Intel is building in Chandler, Arizona, on September 23, 2021.

Made essential to the global economy, these electronic chips have become a major strategic issue for the great powers of the planet.

The manufacture of these components is at the heart of the battle between the United States and China for domination of the high-tech sector. So much so that the current difficulties are also heir to the decision taken in September 2020 by Washington to restrict the sale of technologies to SMIC, the Chinese semi-conductor giant, to counter Beijing’s hegemonic ambitions.

The geographic concentration of places where these chips are produced is a matter of concern today. A study carried out in April 2021 by the Semiconductor Industry Association and the Boston Consulting Group revealed that about 75% of the world’s semiconductor manufacturing capacity, for example, is concentrated in China and East Asia, a region significantly exposed to high seismic activity and geopolitical tensions. And 100% of the world’s most advanced semiconductor manufacturing capacity (less than 10 nanometers) is currently located in Taiwan (92%) and South Korea (8%).

The multiplication of difficulties has pushed the world powers in recent months to react to reduce this dependence. In February, Joe Biden signed a presidential decree to secure American chip supply lines. The United States also convinced TSMC to build a next-generation plant in Arizona.

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For his part, Pat Gelsinger, the boss of Intel, the American giant in the sector, predicted that the shortage was likely to continue until 2023. In this context, he announced the upcoming construction of two semiconductor factories in the United States and the formation of a new division in the United States and Europe, called Intel Foundry Services, a services branch for foundries. specialized in these materials.

In September, at the Munich motor show, Pat Gelsinger announced that he could invest up to 80 billion euros in Europe over the next ten years to expand semiconductor production capacities on the continent. His group should unveil by the end of the year the location of two new large factories in Europe.

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China, too, is concerned: without the American chips, neither Alibaba nor Huawei would have become global giants. China produces 36% of the world’s electronics, but Chinese companies supply only 7.6% of the semiconductors sold worldwide. Reason why Xi Jinping places “Technological independence” at the heart of many of his speeches as well as of the 14e five-year plan (2021-2025).

The European Union (EU) is working on a ” European Chips Act , European law on semiconductors to defend its technological sovereignty: by 2030, the EU aims to produce 20% of semiconductors in the world, i.e. a doubling of its current share.

For his part, Emmanuel Macron presented an investment plan of 30 billion euros six billion will be devoted to developing a national production of key components, while 2.5 billion euros will be intended for the training of “Talents” of tomorrow and improving the financing of industrial start-ups.

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Le Monde with AP, AFP and Reuters

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