Speaker 1: Welcome to brain Stuff production of I Heart Radio. Hey
Speaker 1: brain Stuff, Lauren Boga Bam Here. Whether you've gone shopping
Speaker 1: lately for a new car, a washing machine, a game console,
Speaker 1: or any number of other items, you've probably discovered that
Speaker 1: the stuff you want is way more expensive than it
Speaker 1: used to be and increasingly hard to find. The price
Speaker 1: tags on some high end TVs, for example, have risen
Speaker 1: nearly thirty since this time last year. New cars are
Speaker 1: in such short supply that the cost of used vehicles
Speaker 1: is skyrocketing, to the extent that the price of a Saturn,
Speaker 1: a brand that's been defunct for more than a decade,
Speaker 1: is up by more than twenty six over last year.
Speaker 1: So what's up with that? All of these products do
Speaker 1: have something in common in that they contain semiconductors, also
Speaker 1: referred to as microchips or integrated circuits. These have become
Speaker 1: a vital component in this smart gadgetry of our modern
Speaker 1: war old, enabling the myriad miracles we expect our possessions
Speaker 1: to routinely perform and right now, as a result of
Speaker 1: COVID nineteen's disruptive impact upon semiconductor plants in Asia and
Speaker 1: pandemic induced distortions of consumer demand that United States manufacturers
Speaker 1: off guard. There aren't enough semiconductors to go around, and
Speaker 1: the crisis is likely to get worse before it gets better. Gartner,
Speaker 1: the global market research and advisory firm, recently predicted that
Speaker 1: the worldwide semiconductor shortage will persist for the rest of
Speaker 1: this year and that normal supply levels won't be available
Speaker 1: until the second quarter. For the article this episode is
Speaker 1: based on How Stuff Works, spoke with Rob Handfield. He's
Speaker 1: the Bank of America University Distinguished Professor of Supply Chain
Speaker 1: Management at North Carolina State University and director of the
Speaker 1: school's Supply Chain Resource Cooperative, which studies and works to
Speaker 1: improve the flow of products in various industries. He explained
Speaker 1: that the scope of this applies to quote, dishwashers, thermostats,
Speaker 1: vacuum cleaners, coffeemakers, and cars. Everything has electronics in it.
Speaker 1: The most obvious cause of the shortage has been the
Speaker 1: disruption caused over the past year and a half by
Speaker 1: COVID nineteen. Three Quarters of the world semiconductor making capacity
Speaker 1: is in East Asia, and early on the pandemic forced
Speaker 1: a few countries to temporarily shut down semiconductor manufacturing plants
Speaker 1: along with other businesses, though others, such as China deemed
Speaker 1: semiconductor industry labor forces to be essential workers. International shipping
Speaker 1: of electronics also has been hindered by the pandemic, and recently,
Speaker 1: a new surge in COVID nineteen infections in Taiwan, one
Speaker 1: of the world's key sources of semiconductors, has threatened to
Speaker 1: interfere with production at a time when it's needed more
Speaker 1: than ever. The initial shortage of semiconductors occurred at a
Speaker 1: time when pandemic isolation was forcing millions to stay at
Speaker 1: home and work and play a remotely that stimulated the
Speaker 1: consumer craving for electronics. Expecting a slump in the market,
Speaker 1: semiconductor manufacturers didn't invest in additional capacity. When instead demand surged,
Speaker 1: the chip fabrication foundries called fabs and industry LINGO weren't
Speaker 1: ready to meet it. As a result, the time needed
Speaker 1: to fill orders at some factories has gone from the
Speaker 1: usual twelve weeks to twenty to twenty two weeks. According
Speaker 1: to Handfield, he said, when you order them, you won't
Speaker 1: see them for almost six months. Meanwhile, manufacturers who need
Speaker 1: semiconductors as components miscalculated as well. Some of the biggest
Speaker 1: pain has been felt in the automotive sector. Today's cars
Speaker 1: and SUVs depend upon computers to regulate everything from the
Speaker 1: fuel going into the cylinders to the brakes and steering,
Speaker 1: and according to a recent New York Times article, a
Speaker 1: high end vehicle can contain three thousand or more microchips.
Speaker 1: How stuff Works also spoke by email with Brent Are
Speaker 1: Moritt's associate professor of supply chain Management at Penn State
Speaker 1: University's Smell School of Business. He explained that when the
Speaker 1: pandemic hit last spring, most automakers reduced their forecasts. Instead,
Speaker 1: Morris said, demand for cars and trucks is higher than expected,
Speaker 1: a many people who relied on public transport or ride
Speaker 1: sharing want their own cars. A fire this spring at
Speaker 1: a major Japanese supplier of chips and electronic modules for
Speaker 1: several major automakers helped exacerbate the auto industry shortage, though
Speaker 1: the plant is now nearing full production again, and fixing
Speaker 1: the problem isn't going to be simple or easy. Manufacturing semiconductors,
Speaker 1: which can involve etching as many as twenty patterned layers
Speaker 1: of circuitry onto a tiny piece of silicon is a
Speaker 1: complex process, and the factories needed to perform these tasks
Speaker 1: can take two to three years to build. The U
Speaker 1: S Senate recently passed a build designed to bolster the
Speaker 1: U S tech sector's ability to compete with China that
Speaker 1: would provide fifty two billion dollars in subsidies to domestic
Speaker 1: semiconductor manufacturers for research and development as well as manufacturing.
Speaker 1: The legislation, which still must be voted upon by the House,
Speaker 1: would provide a boost to US chip making, which today
Speaker 1: only accounts for twelve percent of the global capacity, down
Speaker 1: from sent back in. Building new fabs here could help
Speaker 1: provide a bigger supply of US made semiconductors, but it
Speaker 1: wouldn't have much immediate impact upon today's shortage. A Handfield explained,
Speaker 1: there's a lot of discussion around bringing more chip manufacturing
Speaker 1: back to the US, but it's not as if you
Speaker 1: can just build a factory and start making chips. You see,
Speaker 1: semiconductor manufacturers required their own supply chains as well. Handfield
Speaker 1: cites the example of one large Asian manufacturer having two thousand,
Speaker 1: five hundred different suppliers. A new of would need to
Speaker 1: create its own supply chain. Another problem that complicates the
Speaker 1: semiconductor shortage is that many uses requires specialized chips, which
Speaker 1: makes it difficult to adjust manufacturing to meet surges in
Speaker 1: demand for particular products. The Handfield says that one possible
Speaker 1: answer to that problem is the development of customizable chips
Speaker 1: built from components that could be assembled in different ways,
Speaker 1: hasn't get materialized to any level. Meanwhile, as the pandemic
Speaker 1: recedes in the United States due to vaccines, the demand
Speaker 1: for semiconductors and the resulting shortage may grow even more
Speaker 1: dire More, It's said the combination of stimulus funds and
Speaker 1: the fact that people have not been spending money on
Speaker 1: other things like vacations, air travel, restaurant meals has seen
Speaker 1: people want to spend on consumer goods that use chips
Speaker 1: at things like new computers, monitors, tablets, and all manner
Speaker 1: of consumer electronics. This is putting additional strain on the
Speaker 1: supply chain and end the industries that use semi conductors
Speaker 1: are only growing as more of our tech becomes smarter.
Speaker 1: But on the positive side, more It's expects automakers and
Speaker 1: other manufacturers to learn from the crisis and learn how
Speaker 1: to avoid future instances. He said, probably the largest innovation
Speaker 1: that can help right now is building supply chain resiliency.
Speaker 1: The auto industry was famous for reducing inventory, yet in
Speaker 1: the circumstance, the drive for efficiency and low inventories has
Speaker 1: resulted in shortages. Of course, inventory is not the only
Speaker 1: way to build resiliency, yet having spare capacity, flexibility, and
Speaker 1: good supplier relationships can help mitigate the future shortages. I
Speaker 1: expect that the auto industry will be treating semi conductors
Speaker 1: more strategically rather than as a commodity, yet that mindset
Speaker 1: is hard to break to. Bday's episode is based on
Speaker 1: the article A perfect storm of worldwide catastrophes is called
Speaker 1: Singing the Global Semiconductor Shortage on how stuff works dot com,
Speaker 1: written by Patrick J. Keiger. Brain Stuff is production of
Speaker 1: by Heart Radio in partnership with how stuff works dot
Speaker 1: Com and is produced by Tyler Klang. Four more podcasts
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