Last Updated on October 23, 2023 by Kevin Chen
Image source Freepik
It is in 2023 but the world is still reeling from the impact of the Covid-19 pandemic. Technically, all aspects of lives were affect in one way or another, whether it is the economic sphere, political sphere, or social aspect of life. One area that was not spared is the semiconductor industry.
To be precise, the production and supply chain of the semiconductor parts was negatively impacted by the pandemic. The impact was heavily felt as semiconductors literally run the world. They are used in different industries including health, education, automotive, manufacturing, military,telecommunication among others. Keep reading as we discuss in details how the Covid-19 pandemic affected the chips parts industry.
Disruption of the semiconductor parts manufacturing.
This was the direct impact of Covid-19 pandemic on the semiconductor parts. It negatively affected the production of these parts.
How was this possible?
There are various ways in which the production of electronic components was disrupted.
First, once Covid-19 was declared a pandemic, one of measures taken to control it was imposing the lockdown. Different countries across the world used this measure, including the ones that were heavily involved with manufacturing the semiconductor parts.
With lockdown, it means that a good number semiconductor parts manufacturing facilities remained shut for months. This had a direct impact on the volume of chips supplied to the market.
The Covid-19 lockdowns also caused a massive reduction in the production capacity of the companies.
Let’s say employees remain home at home due to lockdowns, it means that only a few of them reported to work. With a smaller workforce available, the production capacity will never be the same.
This will in turn affected the volume of the semiconductor parts that were produced over a given period.
Semiconductor parts manufacturing was also affected by the disruption of the supply chain due to the Covid-19 pandemic.
We can discuss the supply chain from various angles.
First is in the aspect of the raw materials. These components are made of different raw materials.
The lockdowns caused by the pandemic affected the supply of raw materials to the chip parts manufacturers. This eventually slowed down the overall production of the parts.
Another aspect in which the production of the chip parts was affected was increased lead time. This refers to the period between the starting of the production to the time that the component is declared ready for use. The fact that companies relied on less manpower means that production process would lag .Adding the disruption of supply chain worsens the lead time.
Apart from lockdowns, we should also recognize the loss of workers and experts due to death or being sick from the Covid-19 virus. This also had a serious impact on the production of semiconductor parts.
Covid-19 pandemic increased demand for the semiconductor parts
The Covid-19 pandemic caused an increase in the demand for the semiconductor parts.
There were various factors that spiked the demand for the components.
Image source freepik
One of the is the work from home policy that many businesses and even governments adopted.
To slow down the spread of the Corona virus, work-from-home became the new norm.
Most activities were done on digital platforms. This directly lead to an increase in demand of digital electronics for the work from home.
Computers, laptops, tablets, headsets, rechargeable batteries, power adopters are just among the many digital electronics that were in high demand.
Manufacturers of these devices had to up their game in terms of the production to meet the market demand.
This ultimately lead to increased demand for the semiconductor parts.
High demand for the home appliances and consumer electronics
Another way in which the Covid-19 pandemic increased the demand for the semiconductor parts is the demand for the consumer electronics was quite massive.
We have already highlighted the demand for the digital electronics. The same happened to the consumer electronics.
Covid-19 pandemic forced people to stay indoors for long. This meant that consumer electronics became more useful than ever.
Entertainment spots a were closed and there were no public concerts or events. Electronic entertainment appliances such as televisions became the only sources of entertainment.
Home-cooked meals replaced fast-food joints and restaurants. This means that there was a high demand for the kitchen appliances.
To make homes even more comfortable, there was an increased demand for smart homes. More people opted for the connected home electronics that were powered by the IoT chips. This implies that there was a surge in the demand of these chips.
Growth of online shopping
Covid-19 pandemic increased dependency on the online shopping which also increased the demand for the semiconductor parts. More people preferred online shopping to buying goods from local stores.
Digital electrics were used for online shopping hence the rise in demand for the chips.
Impact of Covid-19 on semiconductor prices
With a slump in production and surge in demand, the Covid-19 pandemic also affected the price of the semiconductor parts. By just connecting the two impacts that we have discussed, you can tell that the pandemic led to an increase in the price of the semiconductor parts.
The components for the chips became more expensive than before and this is attributed to various factors.
With a broken supply chain for the semiconductor parts, nothing could be done to save the price of the components from going up.
The low production of the semiconductor components increased competition for the few available components. This also led to a surge in the price of the components as manufacturers tried to outdo each other.
The high price of the semiconductor parts had a direct impact on the prices of the digital electronic goods. They became more expensive than before.
The high prices of the parts also meant that some people were locked out of the market. For example, small businesses that couldn’t afford the parts had to close down their shops. On the other hand, consumers who didn’t afford the electronic goods had to go for cheaper options.
How different industries were affected by the effects of Covid-19 on semiconductor parts
Other than the general perspective, let’s look at the specifics of how other industries were affected by the impact of Covid-19 on chip components.
Automotive industry was among the worst-affected industry by the Covid-19 and its impact on the semiconductor parts. The impact was heavy because modern vehicles heavily rely on chips. The most notable impact was an increase in price of vehicles. Major delays were reported regarding the production of some vehicles.
Digital and consumer electronics is another industry that bore some brunt due to the impact of Covid-19 on chips.
The medical industry was not spared. The fact that most modern medical equipment have semiconductor chips means that they were directly impacted by the dynamics of Covid-19 on semiconductor parts. The price of equipment soared and this in turn increased the cost of healthcare.
The growth and expansion of the telecommunication did not take place fast as was expected. This can also be blamed on Covid-19 as it slowed down the production of networking chips and other related components.
In other words, almost all industries were affected by the impact of Corona virus on semiconductor parts.
What was the response to the impact of Covid-19 pandemic on semiconductor chips?
We have just discussed how different areas of life and industries were affected by the impact of Covid-19 on the components of chips.
So, how did the key players respond to the impacts and what are the long-term effects?
The most immediate response came from the semiconductor parts manufacturers. They focused on expanding their production capacities with the aim of correcting the shortage. Most companies have managed to achieve this goal and by the end of the pandemic we have seen large facilities that specialize in manufacturing chips and their components.
Diversification was another impact of the Covid-19. various aspect of the electronic components manufacturing were diversified. Most manufacturers recognized the importance of not having to depend on a single supply chain for the semiconductor parts.
For instance, it is now easier to find established semiconductor parts suppliers in China than it was before.
Most manufacturers expanded their options for the component sources so as not to fall again into the same problems that affected the supply chain during the pandemic.
One way of diversifying the supply chain is through collaborations. Manufacturers hope that such partnerships will cushion them in the near future in case of similar events.
We have also witnessed advancement of the production technology in the wake of Covid-19 pandemic. There has been great improvement in the methodologies used for the production of electronic components.
The Covid-19 pandemic shook the semiconductor industry and almost brought things into a standstill. Its impact on the semiconductor parts industry affected players within and outside the industry.
The good news is players in the industry responded swiftly to the changes and as the pandemic eased, things have gone back to normal and big lessons have been learned.
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