Semiconductors are the foundation of modern computing, smartphones, laptops, and communications infrastructure of all types rely on these small devices that play a pivotal role in enabling global connectivity. So, what happens during historic market disruptions?
For the uninitiated, a semiconductor is a combination of materials that are used to conduct partial current in an electronic circuit - it acts as a hybrid of a conductor and insulator. It is primarily made up of silicon and germanium, with silicon crystals being the most common semiconducting material used in commercial microelectronics and can sometimes be made up of other ternary (3-part) compounds, oxides and alloys as substitutes. ¹ ⁴
As it stands today, Taiwan and China are the world’s top exporter of semiconductors, shipping out over $49.4 billion US dollars' worth of product in Q1 of 2023 ²; Taiwan remains the top exporter of semiconductors worldwide, making up 40% of their total global exports. ⁸
TSMC or Taiwan Semiconductor Manufacturing Company Limited's Headquarters in Hshinchu, Taiwan - TSWC has been one of the world's key suppliers of semiconductors since 1987.
You may not have held a semiconductor yourself, but they play a vital role in almost all modern electronics; Temperature sensors used in air conditioners, ovens and refrigerators; CPUs in computers, graphics cards cars and mobile phones are made with semiconductors ³ ⁵ - and so are Tait radios.
2020-2023 Global Chip Shortage
Between 2020 and 2023 there was a worldwide shortage of electrical components or ‘chips’, affecting more than 169 industries across the world, causing price hikes, long delays and severe supply chain disruptions.
Covid-19 alone caused a proportional surge in demand for computers and network peripherals due to the work-from-home movement alongside the conversion to distance learning for schools ⁶. This was compounded by the 2021 drought in Taiwan (demineralized, processed water is crucial in the manufacturing of semiconductors) and escalating issues in US-China trade policy. During this period, it’s estimated that global demand for chips increased by 13% at a time when even normal levels of demand could not be met - this is difficult as some computer chips have no immediate substitutes.
This shortage caused large losses across the world, causing disruptions amounting to $240 billion US dollars in 2021.⁷
The shockwave of the chip shortage is still being felt today in many industries where some suppliers are still catching up to fulfill past orders. Some governments have responded by promoting investment in their own infrastructure to minimize reliance on overseas production of micro electronics in the event of another disruptive global event.
Tait flexibility to continue to deliver
Tait manufactures many of its products in New Zealand and faced significant challenges during this time. We reached out to Tait supply chain and engineering specialists to describe how they responded to the major global disruptions and ensured that manufacturing could continue for our customers around the world.
Tait Procurement Manager Hamish Pinfold is a vital connection between our engineering and manufacturing teams, translating engineering requirements into the manufacturing process. Hamish provided insight into the Tait response to the global events that shook up the market.
There was no one-size-fits all solution to the range of complex problems that were affecting the supply of many components, not just semiconductors.
Around April 2020 was the first indication that something was awry, described by Hamish as “a very compartmentalized issue”, when lead times of component suppliers expanded rapidly. “These blowouts were extensive, jumping from 10 weeks delay, to 15, then again to 25, and prices were starting to climb,” said Hamish. These extensive increases in component lead time and prices, alongside limited availability led Tait to explore relationships with new suppliers and consider a range of alternative electrical components. “The volume of issues was extensive and massive” Hamish says. “It is a major advantage for Tait and our customers that our engineering and manufacturing resources are co-located in Christchurch NZ. This enabled a huge amount of flexibility for Tait to redesign where needed to change to more readily available components and continue supply in reasonable timeframes. A major part of my role is circling back with the engineering team to look at alternative parts that could be used without compromising on quality or function.”
“While component supply is returning to normal, we have the processes to be prepared for future disruptions. Covid was a trigger but highlighted a lot of global supply chain issues and pain points for the industry. “This experience has changed the entire conditions of the market,” says Hamish, meaning that 4-years on (at the time of writing), the world has adapted considerably well to the school-from-home and work-from-home work environment.
These were difficult times for Tait as a business but also for everyone adjusting to change in their personal lives. Hamish is especially grateful for the wider Tait teams being agile in their response to the new working environments and wants to highlight the key advantage - the local Tait production and engineering teams. “I’m very proud of our teams and what we’ve achieved during this difficult period. Tait is incredibly lucky to have its production, manufacturing and engineering teams all under one roof - during the covid period, we were able to huddle up the next morning and set out an action plan as the situation was ongoing.”
For Fun:
We asked Hamish if there was any extra information the reader of this article would benefit from knowing. He highlighted that “Demand for electric vehicles was oddly trending upward during the covid period - travel plans were obviously restricted so disposable income that would have otherwise been spent on holidays abroad, some consumers opted to purchase assets, specifically electric cars; this was just one example of discretionary spending moving during global lockdowns.”
1. Hitachi High-Tech - Semiconductors in Everyday Life - https://www.hitachi-hightech.com/global/en/knowledge/semiconductor/room/about/life.html
2. TradeDataMonitor - Chips are up - https://tradedatamonitor.com/datanews/chips-are-up-10-top-trade-trends-in-semiconductors/#:~:text=In%20the%20first%20quarter%20of,billion%20worth%2C%20down%2014.1%25
3. Hitachi High-Tech - The Birth History of Semiconductors - https://www.hitachi-hightech.com/global/en/knowledge/semiconductor/room/about/history.html#:~:text=The%20birth%20history%20of%20semiconductors,the%20junction%20transistor%20in%201948
4. Djena Engineering Journal.edu - History of Semiconductors - https://djena.engineering.cornell.edu/hws/history_of_semiconductors.pdf
5. Investopedia - What Is a Semiconductor and How Is It Used? - https://www.investopedia.com/terms/s/semiconductor.asp#:~:text=Also%20known%20as%20semis%20or,gaming%20hardware%2C%20and%20medical%20equipment
6. Reuters - US Health Coronavirus Tech Demand - https://www.reuters.com/article/us-health-coronavirus-tech-demand-idUSKBN21A0Y9/
7. CBS - Chip Shortage Cost US Economy Billions in 2021 - https://www.cbsnews.com/news/chip-shortage-cost-us-economy-billions-in-2021/
8. CNBC - Taiwan's Strength in Semiconductors; an Achilles Heel - https://www.cnbc.com/2024/01/12/taiwans-strength-in-semiconductors-could-be-its-achilles-heel-economist-says.html
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