A global chip shortage is getting worse — here’s how Austin plays a role in it

Austin

AUSTIN (KXAN) — There’s a worldwide shortage of a tiny piece of technology: computer chips.

Many of the gadgets impacted are in popular demand. CNBC reports Sony is blaming the chip shortage for why people can’t get their hands on a PlayStation 5 game console.

Edward Anderson, University of Texas at Austin McCombs School of Business professor, said we were already starting to see a shortage with the rise of artificial intelligence when the pandemic only increased demand.

“COVID caused a lot of people to start working in their home offices, and so they’re buying computers, they’re buying cameras,” he said.

Last year, PC sales were up nearly 5% with over 10% growth during the holiday season, according to data from Gartner, an IT service management company. That was the highest annual growth in the PC market since 2010.

Anderson, who teaches about supply chains, said meanwhile, manufacturing slowed down.

“They could not produce because of COVID-related things. People were sick; there were supply chain disruptions,” he said.

Anderson said many specialized chips for things like cars and airplanes are made here in Austin at the NXP and Samsung plants. Austin Energy had ordered that production to stop completely during the winter storm.

“…Marking an extraordinary event without any precedent in our 30+ years of operations in the Austin area,” said NXP semiconductors senior vice president of front end operations in a blog post published this week.

NXP announced it started operations again on March 11 but lost about one month of production, and it’s still not running at full capacity.

Samsung told KXAN on Thursday morning it still hadn’t even restarted operations. The company did not offer a timeline.

“While we are currently making efforts to resume operations as soon as possible, the process may require more time to reach normal levels as we inspect and reconfigure the facility. Our primary focus is to ensure safety on-site for our workforce as well as our community,” wrote spokesperson Michele Glaze.

Anderson said Samsung Austin Semiconductor produces about 28% of the company’s chips.

All of that in Austin adds to a global shortage, especially when some specialized chips can’t be found elsewhere.

“If General Motors, for example, can’t get a chip to control their engines, one of those chips, it can’t produce. It can’t go to any other vendors either, so it’s not going to be saved from going outside of Texas,” explained Anderson.

This month, both GM and Ford said the shortage caused them to either slow down or pause production on some models.

Anderson said there’s no quick way to add more capacity to existing chip-making plants — the only way to increase production is to add more facilities.

The good news, he said, is some companies like Samsung already plan to do that. Executives are eyeing Austin for one of them.

Anderson also said companies are starting to stockpile items, so they will have more time to recover before lack of production is felt in the supply chain.

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