A tiny little thing is hobbling supply chains around the world
Lesson summary
Hi there, I’m Jeff and this is Plain English, where we help you upgrade your English every Monday and Thursday with lessons about current events and trending topics. Our main topic today is about the chips that power electronic devices, and specifically, how there aren’t enough of them. Like always, we talk about a popular English phrase in the second half of the lesson. Today, you’ll learn the English expression “cutting-edge.” And I’ll share a quote of the week as well.
This is lesson number 380 and that means JR, our producer, has uploaded the full lesson to PlainEnglish.com/380.
Before we start, I just want to give you a quick definition. I’m going to use the word “capacity” a lot. Capacity is like, the ability to make a lot of stuff. If a manufacturer has a lot of spare capacity, it means they have the ability, if they need it, to make more stuff. But if a factory is running at capacity, or over capacity, it is doing as much as it possibly can, and it can’t do any more. So, watch out for the word “capacity” as you listen.
Chip shortage scrambles global supply chains
Semiconductors are at the heart of electronic devices. They are the reason electronic devices do what you want them to do. They are how your oven knows it’s at 350 degrees, how your car’s headlights turn on at dusk, and how your phone downloads a new Plain English every Monday and Thursday. The building blocks of semiconductors are called transistors. Transistors are tiny devices that switch electronic signals on or off one by one. If you line up ten million modern transistors in a row, end to end, they will stretch for just five to seven centimeters.
A chip is an arrangement of transistors on a silicon wafer. And the chips are what make today’s modern electronic devices work. Dell needs chips for its computers; Sony needs them for its PlayStations; Ford needs them for pickup trucks; John Deere needs them for tractors; LG and Samsung need them for washing machines; and so on .
But there’s just one problem. There aren’t enough chips to go around right now. And that means new cars are left incomplete and gamers can’t get a new PlayStation 5. That’s got manufacturers scrambling to reserve the desperately needed chips that are being produced.
Why is this happening right now? Two reasons… first, consumer devices are becoming more and more powerful. Phones are being asked to do more, computers are getting faster, and gaming consoles are processing sharper graphics. The second factor, the sheer number of devices with chips required has soared. In the consumer world, home appliances and cars now use more computational power to make our lives more convenient. New products like smart light bulbs and doorbells use chips to communicate with our home networks. And the pandemic supercharged demand for home electronics as people have been confined to their residence or are working from home. For example, people are buying more laptops, ring lights, and smart speakers than ever before. Even some toothbrushes now come with computing power!
There’s also a lot of new computing going on behind the scenes: artificial intelligence, cloud computing, data centers, streaming, machine learning, and bitcoin mining all require intensive computing. All this behind-the-scenes computing is competing with consumer devices for the cutting-edge chips with the smallest transistors and the greatest energy efficiency.
On the flip side, there are bottlenecks in the supply. Two-thirds of the world’s semiconductor manufacturing capacity is in Taiwan. Just one company, TSMC, makes 56 percent of the world’s semiconductors. Samsung makes 18 percent and eight more companies fight for the scraps. There just isn’t a lot of competition among manufacturers. The world’s electronics makers are beholden to just a small handful of companies.
Unfortunately, those companies had a bad spring. Chipmaking is a water-intensive process and Taiwan saw its worst drought in 67 years. Reservoirs were down to just ten percent of their capacity. TSMC uses 41 million gallons of water a day but they couldn’t get the water they needed. They had to pump in new water from abroad just to keep the plants operating. Around the same time, several plants in Japan were destroyed by fires; these plants served the car industry and makers of audio gear.
So, with a shortage of chips, there’s one natural solution, right? Just build more factories.
That is happening. Existing manufacturers and new companies are scrambling to create more capacity. The U.S. and Europe both announced subsidies for companies to build more semiconductor manufacturing capacity within their own borders. The problem is that it takes years to get a semiconductor manufacturing plant up and running. The world’s electronics industry will have to deal with chip shortages for a few years while the new capacity ramps up . Ironically, so much new capacity has been announced that the industry may have the opposite problem if it all gets built: too much supply in a few years.
In the meantime, companies that use chips in their products will have to get used to a world of shortages. Smartphone buyers may have to pay higher prices for the most advanced chips in their new phones. Samsung said it may delay or even skip the release of its next Galaxy Note phone altogether. Manufacturers are trying to allocate the few chips that they have to where they’re most needed. Carmakers, for example, are starting to reduce the number of electronics they put in new vehicles. They’re removing some of the bells and whistles they originally wanted to include, such as blind-spot monitoring, navigation systems, and second screens.
Chips are everywhere
I don’t think that you need a second screen in a car, but blind-spot monitoring is really pretty important. That’s when the car tells you if there’s another car in that area that you can’t see in your mirrors so that you don’t run into them. It’s crazy to think that carmakers are leaving blind-spot monitoring out of new cars not because of the price but because they just can’t get their hands on the chips. That could lead to more crashes.
It’s true, chips are everywhere. I saw an ad on TV for a refrigerator that will tell you what’s in the fridge if you’re at the grocery store and you forget what you have already. I think it’s some combination of scales on the shelves and a camera inside.
I laugh at that, but I’m part of the problem; I know it. Amazon just had a big sale and I picked up two more smart plugs that will turn lights on and off automatically. I have one set to do it at sunset. I’ll tell the app where I live and it will turn the light on a little before sunset, and then off again when I go to bed. As the sunset changes, the time it comes on changes too. That’s really cool, but I’d be willing to donate those chips so that someone could get blind-spot monitoring in their car. I don’t think that’s how it works, though.
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