The news: As most of the world relies on chip production from TSMC, the global shortage and the lack of a diversified semiconductor supply chain pose risks to the global economy, per The Wall Street Journal.
How we got here: TSMC’s microchips are in billions of products ranging from iPhones, PCs, smart home devices, and IoT sensors. TSMC produces high-performance processors designed by companies like Apple and Qualcomm for the latest smartphones and computers, but it also dominates the market for less-sophisticated microcontrollers used for automating smart cars and smart home appliances.
Heavy reliance on a single chip producer is exposing risks to the global economy, a reality that’s only become clearer amid the global semiconductor shortage and which is resulting in higher costs being shouldered by consumers. Surging demand for electronics during the pandemic overwhelmed the semiconductor industry and led to a global shortage expected to last another 18 months, per CNBC. China, Europe, and the US have started to invest in various chip foundries to satisfy future demand and better diversify supply chains, but these efforts will have no effect on the current shortage.
The bigger picture: While several chip manufacturers are building chip factories in the US, the scale of investment pales beside TSMC’s planned expansion, which will cost $100 billion over the next three years. TSMC’s investment is a quarter of the entire industry’s capital spending per VLSI Research. Investments matching or surpassing TSMC’s planned expansion are needed to create a more diversified microchip fab industry.
The global chip shortage is starting to push up prices of items like laptops, displays, and printers and could make smartphones and cars even more expensive. PC manufacturers like Asus and HP have already started to raise prices by as much as 8%, while printer prices have gone up by 20%, per StockXpo. Pricing is also going up for new vehicles, even as carmakers are producing fewer units because of the chip shortage.