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Why the World Is Short of Computer Chips, and Why It Matters

Semiconductor Production at Globalfoundries Europe Plant
Photographer: Liesa Johannssen-Koppitz/Bloomberg
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Carmakers slashed production. PlayStations got harder to find in stores. Broadband providers faced monthslong delays for internet routers. All of these phenomena and more had a similar cause: an abrupt and cascading shortage of semiconductors. Also known as integrated circuits or more commonly just chips, they may be the tiniest yet most exacting product ever manufactured on a global scale. The combination of cost and difficulty in producing them has fostered a worldwide reliance on two Asian powerhouses — Taiwan Semiconductor Manufacturing Co. (TSMC) and South Korea’s Samsung Electronics Co. That dependence was brought into stark relief when the Covid-19 pandemic and rising U.S.-China tensions made chips scarce. Hundreds of billions of dollars will be spent in the coming years in a global race to expand production, with geopolitical as well as economic implications.

Here are some factors: