Why the World Is Short of Computer Chips, and Why It Matters

Carmakers slashed production. PlayStations got harder to find in stores. Broadband providers faced monthslong delays for internet routers. All of these phenomena and more had a similar cause: an abrupt and cascading shortage of semiconductors. Also known as integrated circuits or more commonly just chips, they may be the tiniest yet most exacting product ever manufactured on a global scale. The combination of cost and difficulty in producing them has fostered a worldwide reliance on two Asian powerhouses — Taiwan Semiconductor Manufacturing Co. (TSMC) and South Korea’s Samsung Electronics Co. That dependence was brought into stark relief when the Covid-19 pandemic and rising U.S.-China tensions made chips scarce. Hundreds of billions of dollars will be spent in the coming years in a global race to expand production, with geopolitical as well as economic implications.

Here are some factors: