Car and electronic chips: what are they and where do they come from?

The production of chips is essential for the development and operation of electronic devices and other industries such as the automotive industry. | Photo: Getty Images.

With the onset of the COVID-19 pandemic, the chip crisis in the world was also present, and it is that the demand for electronic devices caused the manufacturers of these products to be exceeded in their productions. But What are chips? Where do they come from? And how does the shortage affect them?here we tell you.

What are chips?

Chips or microprocessors are the foundation of the global digital economy, since they are the “brains” that allow the operation of the components or electronic items used in electronic devices and automobiles, said Roberto Martinez of the Western Institute of Technology and Higher Studies (ITESO) belonging to the Jesuit University of Guadalajara.

It is through chips or semiconductors that the exchange of information between devices is possible, and in the case of automobiles, experts say that they use up to 1,400 microprocessors on average to function.

Where do they come from and who produces the chips?

According to the expert, 80% of semiconductor production is located in Asia, especially in Taiwan and South Korea.

“The world’s leading manufacturer of integrated circuits is TSMC, which stands for Taiwan Semiconductor Manufacturing Company. The two South Korean companies that produce the most chips are Samsung Electronics and SK Hynix Inc. Martinez noted.

The United States barely has 11% of the market, mainly through the Intel company, and Europe has the remaining 9%.

Why is there a chip crisis in the world?

The chip making was affected by the sanitary restrictions of COVID-19, and, according to Martínez, at the beginning of the pandemic the automotive industry reacted with fear and canceled orders for semiconductors, anticipating a drop in sales.

The opposite occurred with the electronic device industry such as computers, tablets and smartphones, which increased orders for chips to make those products, he said.

As the months passed, the auto industry resumed demand for chips in the face of the rebound in the economy due to the advancement of vaccination against COVID-19 in several countries, says the expert. However, since the manufacturing process of these electronic products is long, the demand exceeded the capacities of the manufacturers, causing a general crisis in production.

As only Taiwan and South Korea are the only manufacturers of chips and semiconductors, production is concentrated in few players, said the specialist.

To this was added the fire of the Japanese company Renesas Electronics in 2021, which affected companies such as Ford, General Motors, Toyota, Nissan or Continental.

Effects of the lack of chips

For the ITESO academic, the chip crisis affects in various ways people, one of them is that consumer prices of electronic products rise.

Besides, industry revenues are affected that depend on the chips and equipment availability is reduced recent creating shortages.

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