1 00:00:01,920 --> 00:00:06,320 Speaker 1: Welcome to brain Stuff production of I Heart Radio. Hey 2 00:00:06,400 --> 00:00:10,440 Speaker 1: brain Stuff, Lauren Boga Bam Here. Whether you've gone shopping 3 00:00:10,520 --> 00:00:13,840 Speaker 1: lately for a new car, a washing machine, a game console, 4 00:00:14,000 --> 00:00:17,320 Speaker 1: or any number of other items, you've probably discovered that 5 00:00:17,360 --> 00:00:19,919 Speaker 1: the stuff you want is way more expensive than it 6 00:00:20,000 --> 00:00:23,840 Speaker 1: used to be and increasingly hard to find. The price 7 00:00:23,880 --> 00:00:27,320 Speaker 1: tags on some high end TVs, for example, have risen 8 00:00:27,440 --> 00:00:31,840 Speaker 1: nearly thirty since this time last year. New cars are 9 00:00:31,840 --> 00:00:34,680 Speaker 1: in such short supply that the cost of used vehicles 10 00:00:34,720 --> 00:00:38,040 Speaker 1: is skyrocketing, to the extent that the price of a Saturn, 11 00:00:38,240 --> 00:00:40,680 Speaker 1: a brand that's been defunct for more than a decade, 12 00:00:41,000 --> 00:00:43,559 Speaker 1: is up by more than twenty six over last year. 13 00:00:44,960 --> 00:00:48,239 Speaker 1: So what's up with that? All of these products do 14 00:00:48,360 --> 00:00:52,680 Speaker 1: have something in common in that they contain semiconductors, also 15 00:00:52,720 --> 00:00:56,640 Speaker 1: referred to as microchips or integrated circuits. These have become 16 00:00:56,720 --> 00:00:59,800 Speaker 1: a vital component in this smart gadgetry of our modern 17 00:00:59,840 --> 00:01:03,440 Speaker 1: war old, enabling the myriad miracles we expect our possessions 18 00:01:03,440 --> 00:01:07,280 Speaker 1: to routinely perform and right now, as a result of 19 00:01:07,280 --> 00:01:11,840 Speaker 1: COVID nineteen's disruptive impact upon semiconductor plants in Asia and 20 00:01:12,000 --> 00:01:16,880 Speaker 1: pandemic induced distortions of consumer demand that United States manufacturers 21 00:01:16,880 --> 00:01:21,920 Speaker 1: off guard. There aren't enough semiconductors to go around, and 22 00:01:22,160 --> 00:01:26,520 Speaker 1: the crisis is likely to get worse before it gets better. Gartner, 23 00:01:26,640 --> 00:01:30,399 Speaker 1: the global market research and advisory firm, recently predicted that 24 00:01:30,440 --> 00:01:33,640 Speaker 1: the worldwide semiconductor shortage will persist for the rest of 25 00:01:33,680 --> 00:01:36,600 Speaker 1: this year and that normal supply levels won't be available 26 00:01:36,680 --> 00:01:41,920 Speaker 1: until the second quarter. For the article this episode is 27 00:01:41,959 --> 00:01:45,319 Speaker 1: based on How Stuff Works, spoke with Rob Handfield. He's 28 00:01:45,360 --> 00:01:48,720 Speaker 1: the Bank of America University Distinguished Professor of Supply Chain 29 00:01:48,760 --> 00:01:52,280 Speaker 1: Management at North Carolina State University and director of the 30 00:01:52,280 --> 00:01:55,920 Speaker 1: school's Supply Chain Resource Cooperative, which studies and works to 31 00:01:55,960 --> 00:02:00,000 Speaker 1: improve the flow of products in various industries. He explained 32 00:02:00,160 --> 00:02:03,800 Speaker 1: that the scope of this applies to quote, dishwashers, thermostats, 33 00:02:03,880 --> 00:02:08,400 Speaker 1: vacuum cleaners, coffeemakers, and cars. Everything has electronics in it. 34 00:02:09,360 --> 00:02:11,799 Speaker 1: The most obvious cause of the shortage has been the 35 00:02:11,840 --> 00:02:14,359 Speaker 1: disruption caused over the past year and a half by 36 00:02:14,440 --> 00:02:19,160 Speaker 1: COVID nineteen. Three Quarters of the world semiconductor making capacity 37 00:02:19,200 --> 00:02:22,800 Speaker 1: is in East Asia, and early on the pandemic forced 38 00:02:22,800 --> 00:02:26,800 Speaker 1: a few countries to temporarily shut down semiconductor manufacturing plants 39 00:02:26,840 --> 00:02:30,720 Speaker 1: along with other businesses, though others, such as China deemed 40 00:02:30,760 --> 00:02:35,840 Speaker 1: semiconductor industry labor forces to be essential workers. International shipping 41 00:02:35,840 --> 00:02:40,280 Speaker 1: of electronics also has been hindered by the pandemic, and recently, 42 00:02:40,560 --> 00:02:43,880 Speaker 1: a new surge in COVID nineteen infections in Taiwan, one 43 00:02:43,919 --> 00:02:47,160 Speaker 1: of the world's key sources of semiconductors, has threatened to 44 00:02:47,200 --> 00:02:49,840 Speaker 1: interfere with production at a time when it's needed more 45 00:02:49,880 --> 00:02:54,600 Speaker 1: than ever. The initial shortage of semiconductors occurred at a 46 00:02:54,639 --> 00:02:58,400 Speaker 1: time when pandemic isolation was forcing millions to stay at 47 00:02:58,400 --> 00:03:02,280 Speaker 1: home and work and play a remotely that stimulated the 48 00:03:02,320 --> 00:03:06,640 Speaker 1: consumer craving for electronics. Expecting a slump in the market, 49 00:03:06,880 --> 00:03:13,160 Speaker 1: semiconductor manufacturers didn't invest in additional capacity. When instead demand surged, 50 00:03:13,400 --> 00:03:18,000 Speaker 1: the chip fabrication foundries called fabs and industry LINGO weren't 51 00:03:18,000 --> 00:03:21,520 Speaker 1: ready to meet it. As a result, the time needed 52 00:03:21,520 --> 00:03:23,919 Speaker 1: to fill orders at some factories has gone from the 53 00:03:24,040 --> 00:03:27,040 Speaker 1: usual twelve weeks to twenty to twenty two weeks. According 54 00:03:27,120 --> 00:03:30,280 Speaker 1: to Handfield, he said, when you order them, you won't 55 00:03:30,280 --> 00:03:35,560 Speaker 1: see them for almost six months. Meanwhile, manufacturers who need 56 00:03:35,600 --> 00:03:40,080 Speaker 1: semiconductors as components miscalculated as well. Some of the biggest 57 00:03:40,120 --> 00:03:43,640 Speaker 1: pain has been felt in the automotive sector. Today's cars 58 00:03:43,640 --> 00:03:47,240 Speaker 1: and SUVs depend upon computers to regulate everything from the 59 00:03:47,360 --> 00:03:50,280 Speaker 1: fuel going into the cylinders to the brakes and steering, 60 00:03:50,800 --> 00:03:53,440 Speaker 1: and according to a recent New York Times article, a 61 00:03:53,520 --> 00:03:57,120 Speaker 1: high end vehicle can contain three thousand or more microchips. 62 00:03:58,520 --> 00:04:01,280 Speaker 1: How stuff Works also spoke by email with Brent Are 63 00:04:01,440 --> 00:04:04,640 Speaker 1: Moritt's associate professor of supply chain Management at Penn State 64 00:04:04,720 --> 00:04:08,560 Speaker 1: University's Smell School of Business. He explained that when the 65 00:04:08,600 --> 00:04:13,880 Speaker 1: pandemic hit last spring, most automakers reduced their forecasts. Instead, 66 00:04:14,000 --> 00:04:17,440 Speaker 1: Morris said, demand for cars and trucks is higher than expected, 67 00:04:17,720 --> 00:04:20,800 Speaker 1: a many people who relied on public transport or ride 68 00:04:20,800 --> 00:04:25,560 Speaker 1: sharing want their own cars. A fire this spring at 69 00:04:25,600 --> 00:04:28,960 Speaker 1: a major Japanese supplier of chips and electronic modules for 70 00:04:29,080 --> 00:04:34,000 Speaker 1: several major automakers helped exacerbate the auto industry shortage, though 71 00:04:34,040 --> 00:04:38,440 Speaker 1: the plant is now nearing full production again, and fixing 72 00:04:38,440 --> 00:04:43,039 Speaker 1: the problem isn't going to be simple or easy. Manufacturing semiconductors, 73 00:04:43,120 --> 00:04:46,400 Speaker 1: which can involve etching as many as twenty patterned layers 74 00:04:46,440 --> 00:04:49,880 Speaker 1: of circuitry onto a tiny piece of silicon is a 75 00:04:49,920 --> 00:04:54,040 Speaker 1: complex process, and the factories needed to perform these tasks 76 00:04:54,160 --> 00:04:58,240 Speaker 1: can take two to three years to build. The U 77 00:04:58,320 --> 00:05:01,279 Speaker 1: S Senate recently passed a build designed to bolster the 78 00:05:01,400 --> 00:05:04,520 Speaker 1: U S tech sector's ability to compete with China that 79 00:05:04,560 --> 00:05:08,280 Speaker 1: would provide fifty two billion dollars in subsidies to domestic 80 00:05:08,320 --> 00:05:12,640 Speaker 1: semiconductor manufacturers for research and development as well as manufacturing. 81 00:05:13,480 --> 00:05:16,279 Speaker 1: The legislation, which still must be voted upon by the House, 82 00:05:16,600 --> 00:05:19,719 Speaker 1: would provide a boost to US chip making, which today 83 00:05:19,760 --> 00:05:22,840 Speaker 1: only accounts for twelve percent of the global capacity, down 84 00:05:22,880 --> 00:05:28,120 Speaker 1: from sent back in. Building new fabs here could help 85 00:05:28,200 --> 00:05:31,839 Speaker 1: provide a bigger supply of US made semiconductors, but it 86 00:05:31,880 --> 00:05:37,000 Speaker 1: wouldn't have much immediate impact upon today's shortage. A Handfield explained, 87 00:05:37,360 --> 00:05:40,560 Speaker 1: there's a lot of discussion around bringing more chip manufacturing 88 00:05:40,600 --> 00:05:42,720 Speaker 1: back to the US, but it's not as if you 89 00:05:42,760 --> 00:05:47,120 Speaker 1: can just build a factory and start making chips. You see, 90 00:05:47,400 --> 00:05:52,480 Speaker 1: semiconductor manufacturers required their own supply chains as well. Handfield 91 00:05:52,520 --> 00:05:56,400 Speaker 1: cites the example of one large Asian manufacturer having two thousand, 92 00:05:56,640 --> 00:06:00,760 Speaker 1: five hundred different suppliers. A new of would need to 93 00:06:00,800 --> 00:06:05,320 Speaker 1: create its own supply chain. Another problem that complicates the 94 00:06:05,400 --> 00:06:10,240 Speaker 1: semiconductor shortage is that many uses requires specialized chips, which 95 00:06:10,279 --> 00:06:13,400 Speaker 1: makes it difficult to adjust manufacturing to meet surges in 96 00:06:13,480 --> 00:06:17,440 Speaker 1: demand for particular products. The Handfield says that one possible 97 00:06:17,440 --> 00:06:20,839 Speaker 1: answer to that problem is the development of customizable chips 98 00:06:21,080 --> 00:06:24,040 Speaker 1: built from components that could be assembled in different ways, 99 00:06:24,600 --> 00:06:30,440 Speaker 1: hasn't get materialized to any level. Meanwhile, as the pandemic 100 00:06:30,480 --> 00:06:33,480 Speaker 1: recedes in the United States due to vaccines, the demand 101 00:06:33,520 --> 00:06:37,040 Speaker 1: for semiconductors and the resulting shortage may grow even more 102 00:06:37,120 --> 00:06:41,479 Speaker 1: dire More, It's said the combination of stimulus funds and 103 00:06:41,520 --> 00:06:43,880 Speaker 1: the fact that people have not been spending money on 104 00:06:43,920 --> 00:06:47,600 Speaker 1: other things like vacations, air travel, restaurant meals has seen 105 00:06:47,640 --> 00:06:50,480 Speaker 1: people want to spend on consumer goods that use chips 106 00:06:50,760 --> 00:06:53,880 Speaker 1: at things like new computers, monitors, tablets, and all manner 107 00:06:53,920 --> 00:06:57,479 Speaker 1: of consumer electronics. This is putting additional strain on the 108 00:06:57,480 --> 00:07:02,080 Speaker 1: supply chain and end the industries that use semi conductors 109 00:07:02,160 --> 00:07:04,880 Speaker 1: are only growing as more of our tech becomes smarter. 110 00:07:06,360 --> 00:07:09,800 Speaker 1: But on the positive side, more It's expects automakers and 111 00:07:09,840 --> 00:07:13,280 Speaker 1: other manufacturers to learn from the crisis and learn how 112 00:07:13,320 --> 00:07:18,040 Speaker 1: to avoid future instances. He said, probably the largest innovation 113 00:07:18,080 --> 00:07:21,200 Speaker 1: that can help right now is building supply chain resiliency. 114 00:07:21,760 --> 00:07:25,440 Speaker 1: The auto industry was famous for reducing inventory, yet in 115 00:07:25,480 --> 00:07:29,320 Speaker 1: the circumstance, the drive for efficiency and low inventories has 116 00:07:29,360 --> 00:07:33,160 Speaker 1: resulted in shortages. Of course, inventory is not the only 117 00:07:33,160 --> 00:07:37,360 Speaker 1: way to build resiliency, yet having spare capacity, flexibility, and 118 00:07:37,400 --> 00:07:41,600 Speaker 1: good supplier relationships can help mitigate the future shortages. I 119 00:07:41,680 --> 00:07:44,680 Speaker 1: expect that the auto industry will be treating semi conductors 120 00:07:44,800 --> 00:07:48,760 Speaker 1: more strategically rather than as a commodity, yet that mindset 121 00:07:48,960 --> 00:07:56,560 Speaker 1: is hard to break to. Bday's episode is based on 122 00:07:56,600 --> 00:08:00,000 Speaker 1: the article A perfect storm of worldwide catastrophes is called 123 00:08:00,000 --> 00:08:03,239 Speaker 1: Singing the Global Semiconductor Shortage on how stuff works dot com, 124 00:08:03,240 --> 00:08:06,160 Speaker 1: written by Patrick J. Keiger. Brain Stuff is production of 125 00:08:06,160 --> 00:08:08,320 Speaker 1: by Heart Radio in partnership with how stuff works dot 126 00:08:08,320 --> 00:08:11,480 Speaker 1: Com and is produced by Tyler Klang. Four more podcasts 127 00:08:11,560 --> 00:08:14,680 Speaker 1: my Heart Radio, visit the heart Radio app, Apple Podcasts, 128 00:08:14,760 --> 00:08:16,560 Speaker 1: or wherever you listen to your favorite shows.