Semiconductors & Hardware — The Chip Shortage
Why a Factory Built in 1990 Can Bring the Modern World to Its Knees
The device you're reading this on contains components that can only be manufactured in a handful of buildings on Earth — and when those buildings sneeze, entire industries catch a cold.
The Idea
Semiconductors are not like most manufactured goods. You can build a new steel mill in a couple of years. A state-of-the-art chip fabrication plant — a 'fab' — takes four to five years to construct, costs tens of billions, and requires equipment so specialised that a single machine (ASML's extreme ultraviolet lithography tool) is assembled from parts made by over 5,000 suppliers across dozens of countries. There are fewer than a dozen of these machines shipped per year, globally. This extreme concentration is the structural story behind the chip shortage that began around 2020 and rippled through everything from cars to games consoles to medical devices. It wasn't simply a pandemic supply shock. It exposed a decades-long pattern of consolidation: the semiconductor industry had quietly narrowed into a few giant fabs, overwhelmingly in Taiwan and South Korea, producing the most advanced chips for the entire planet. Meanwhile, the global economy had quietly become dependent on just-in-time supply chains with almost no buffer. What makes this especially counterintuitive is that chip design and chip manufacturing have completely separated. A company like Apple designs chips of breathtaking sophistication — but builds none of them. It hands the blueprints to TSMC in Taiwan, which actually etches the circuits. This 'fabless' model made the industry more innovative and more fragile in roughly equal measure.
In the World
In 2021, Ford had to park thousands of nearly finished F-150 pickup trucks in fields across Michigan and Kentucky, waiting for a single missing chip — a component worth less than the price of a modest meal — that controlled the vehicle's electronic systems. Ford eventually shipped those trucks without certain features, retrofitting them later. General Motors idled multiple plants entirely. The chip in question wasn't even a cutting-edge component. It was a relatively simple microcontroller, the kind made in older fabs using mature manufacturing processes. The auto industry had historically treated these chips as commodities, ordering small batches on short notice and keeping minimal inventory. When the pandemic briefly caused automakers to cancel chip orders in early 2020 — expecting a crash in car sales — the fabs redirected that capacity to consumer electronics, which were booming. When car demand bounced back faster than anyone expected, there was no capacity to reclaim. The queue stretched months. This is what systemic fragility actually looks like in practice: not a dramatic failure, but a missing chip the size of a fingernail halting the production of a vehicle that weighs over two tonnes. The shortage cost the global auto industry an estimated hundreds of billions in lost revenue over two years — all tracing back to a supply chain optimised for efficiency at the expense of any resilience whatsoever.
Why It Matters
The chip shortage reframed a question most people had never thought to ask: what does the physical infrastructure of the digital world actually look like, and how concentrated is it? The answer turns out to be genuinely alarming — not in a conspiratorial way, but in the way that complex systems always carry hidden risk when they optimise for a single variable (cost, in this case) and neglect redundancy. Governments are now spending enormous sums trying to repatriate chip manufacturing — the US CHIPS Act, European semiconductor initiatives, Japan's agreements with TSMC — precisely because policymakers belatedly recognised that relying on a handful of fabs for critical infrastructure is a geopolitical vulnerability as much as an economic one. For you personally, this is a useful lens for any system you depend on. Efficiency and resilience are almost always in tension. Supply chains, personal finances, organisations, ecosystems — anything optimised to run lean has likely shed the slack that would protect it under stress. The chip shortage is a master class in what happens when the slack runs out.
A Question to Ponder
In your own life or work, where have you optimised so hard for efficiency that you've quietly eliminated the buffer that would protect you when something unexpected goes wrong?
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