The global chip shortage continues to particularly disrupt automakers. Instead of slowing down, reports continue to show that automakers are cutting back on production. Lack of components means cars cannot be finished, and modern cars have an increasing number of parts that use semiconductors. After continuing to see this topic in the news, I decided to write an article explaining why there is a shortage of chips and what can be done (not much, at least in the short term. ). It also gives us the opportunity to better understand the global economy.
Let’s start with a quick video of CNBC which gives a high level explanation of the situation:
The whole situation is very complex, perhaps to the point of being ridiculous. Not only are there a variety of different types of semiconductors, older designs are still very useful. These older designs have to be made with older machines, which are not manufactured.
When the pandemic began, automakers canceled or drastically reduced orders. Meanwhile, demand for other consumer electronics soared, meaning chipmakers still had plenty of customers. With more work from home, an increased need for home entertainment during shutdowns and even distance education, the demand for home electronics has exploded. Even six months after their release, it’s still very difficult (or expensive) to get hold of an XBox Series X or a Playstation 5 (and for that reason my son is quite restless).
Now that auto production is on the rise again, automakers can’t send their orders back to chipmakers, which passed to other customers last year, and they couldn’t keep up with those either. They don’t turn down orders and aren’t hurt by canceled orders last year, but there just isn’t enough to supply everyone right now.
Our Cybernetics Collective
If you think about it, our human need to interact is what drove it all. Why do we need chips in cars? Communication (at least receive it if nothing else). Music, talk radio, podcasts and now even communication with the car’s systems are all done with buttons and / or screens. While many cars offer an increasingly sterile and disconnected mechanical experience, they offer a lively, connected infotainment experience (and, of course, some cars do both).
The same is even more true for the non-automotive devices that we use every day and have ordered many more during the pandemic. We don’t just want to connect with other people, we need them. Our jobs and our lives depend on it. Whether someone is working remotely or whether they’re what the government considers essential (as if one of us isn’t), the need to connect is what keeps it all going.
For the economy, it really predates the more advanced computer technology of today, and even completely predates computer technology. Let’s take a look at the modest pencil, for example. The roots of pencil design go back to an ancient Roman writing instrument, called a stylus, while the modern pencil is rather 300-400 years old.
It still took a huge collective of people, communicating and cooperating, to make them:
Even before computers, the economy was a cybernetic collective driven by money (or currencies). The price of a material or good is reflected in all that it costs to bring it to you. Lots of other people traded goods and money before you bought the pencil (or whatever), and from those prices comes the price you have to pay to get it. Then you turn around, do things with the things you buy, and other people pay you for your products and services.
There is no “pencil tsar” who coordinates all this action. The market, a sort of collective consciousness, does this without anyone needing to know every detail of how a product is built or what went into providing a service. With the exception of some rather limited government regulations designed to keep people from hurting themselves (in theory), this all happens spontaneously.
The only difference today is that communication is faster with electronics, mass travel where you can be almost anywhere on the planet in a day or two, and other technological improvements. Now that the collective has become completely cybernetic, things are moving fast and can be much more efficient.
How the Chip Collectives (and the whole collective) got sick
The coronavirus has done more than just make people sick. It turned the whole system upside down. Assuming it all started in a wet market (even Anthony Fauci is questioning it now), it happened something like the last episode of Star Trek: Traveling Where Queen Borg (leading a collective of evil cybernetic group consciousness) assimilates more than it Negotiated for. Our collectives were infected with something that was just enough to bring the chaos back to order.
When huge portions of our economic cybernetic collective were unable to engage in what they normally did, it plunged everything into chaos. With automakers unable to buy them, combined with increased demand for electronics (so people at home can better interface with the collective), have ended up making these price signals unheard of for people.
Every industry has felt this in one way or another, but some have had it much worse than others.
Make the collective resistant to pathogens causing chaos
The problem in many cases is that people have become too accustomed to stability. We (wrongly) assumed that horrible things like the plague were something people had in the Middle Ages, with their limited medical technology, silly superstitions, and poor hygiene. Today, we thought, we’re much smarter about these things, and so major contagion is something confined to the past.
What we didn’t know is that today’s cyber collectives may be more susceptible than ever to pathogens. We are moving people and goods faster than at any time in history (with the glaring exception of the economically unachievable Concorde program). We also tend to value people who come to work no matter what, or to structure pay and benefits for low-income people in such a way as to encourage them to come to work due to illness. On top of all this, economic considerations are at the fore and have led many jurisdictions not to take the necessary steps early on to contain the spread.
It all turned out to be shortsighted. Keeping travel completely open from other countries ended up having a much bigger impact on the economy than the restrictions would have cost. Sick people going about their business to avoid not being able to pay their rent kept the spread going (and unemployment programs got people the money they needed – several weeks after it needed).
Once the bigger lockdowns started to spread (due to the failure to implement decent early interventions), this threw arrangements such as just-in-time production and limited reserves into chaos. total. Problems spilled over into the collective in unexpected ways. For example, most of the commercial production of CO2 was a by-product of gasoline production. When people drove less, less gasoline was produced. This led to CO2 shortages and affected the production of soft drinks.
If we are to resist chaos and maintain order, we must look for ways to improve our preparedness for supply disruptions. It would be a good idea to have supplies on hand for certain items. More flexible production systems are another. Better still would be to take early action to fix the problem while it is still small.
Featured Image: Screenshot from Star Trek: First Contact. Primary copyright (fair use, comment)