The global chip shortage continues to roil automotive manufacturers particularly hard. Instead of easing up, reports still continue to show automakers cutting production. Running out of components means cars can’t be completed, and modern cars have an increasing number of parts that use semiconductors. After continuing to see this topic in the news, I decided to put an article together explaining why there’s a chip shortage and what can be done (it isn’t 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 by CNBC that gives a high-level explanation of the situation:
The whole situation is very complex, perhaps to the point of ridiculousness. Not only are there a variety of different types of semiconductors, but older designs are still quite useful. Those older designs have to be fabricated with older machines, which aren’t being made.
When the pandemic began, automakers canceled their orders or reduced them severely. Meanwhile, the demand for other consumer electronics soared, which meant the chipmakers still had plenty of customers. With more working from home going on, an increased need for home entertainment during lockdowns, and even remote schooling, the demand for home electronics went through the roof. Even six months after their release, it’s still very difficult (or expensive) to get ahold of an XBox Series X or Playstation 5 (and for this reason, my son is quite agitated).
Now that car production is going up again, the automakers can’t get their orders back into the chipmakers, who’ve moved onto other customers last year, and they couldn’t keep up with those, either. They aren’t refusing orders, and don’t have hurt feelings over the canceled orders last year, but there’s just not enough to supply everyone right now.
Our Cybernetic Collective
If you think about it, our human need to interact is what drove all this. What do we need chips in cars for? Communication (at least receiving it if nothing else). Music, talk radio, podcasts, and now even communicating with the car’s systems all happens with buttons and/or screens. While many cars are offering an increasingly sterile and disconnected mechanical experience, they’re offering a lively and connected infotainment experience (and, of course, some cars do both).
The same is even more true for the non-automotive devices we use every day, and which we ordered a whole bunch more of during the pandemic. We don’t just want to connect with other people — we need to. Our jobs and lives depend on it. Whether someone is working remotely or they’re what the government considers essential (as if any of us weren’t), the need to connect is what keeps this all going.
For the economy, it really predates today’s more advanced computer technology, and even predates computer technology completely. Let’s take a look at the modest pencil, for example. The roots of the pencil’s design date back to an ancient Roman writing instrument, called a stylus, while the modern pencil is more like 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 currency (or currencies). Reflected in the price of a material or good is the whole of everything it costs to bring it to you. Many other people exchanged goods and money prior to your purchase of the pencil (or anything), and from those prices comes the price you need 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’s no “pencil czar” who coordinates all of this action. The market, a collective consciousness of sorts, does this without anybody needing to know every detail of a product’s construction or what went into providing a service. With the exception of some rather limited government regulations designed to keep people from getting hurt (in theory), this all happens spontaneously.
The only difference today is that communication happens faster with electronics, mass travel where you can be almost anywhere on the planet within a day or two, and other technological improvements. Now that the collective has gone fully cybernetic, things happen fast and can be a lot more efficient.
How The Chip Collectives (& The Collective Whole) Got Sick
The Coronavirus did a whole lot more than just get people sick. It threw the whole system into disarray. Assuming the whole thing started in a wet market (even Anthony Fauci is questioning that now), it went something like the last episode of Star Trek: Voyager where the Borg Queen (the head of an evil cybernetic group consciousness collective) assimilates more than she bargained for. Our collectives got infected with something that was just enough to bring chaos to order.
When huge portions of our economic cybernetic collective couldn’t engage in what they normally did, it threw everything into chaos. The automakers being unable to buy them, combined with an increased demand for electronics (so people at home could better interface with the collective), ended up making these price signals not make a lot of sense to people.
Every industry felt this in some way or other, but some got it a lot worse than others.
Making The Collective Resistant To Chaos-Inducing Pathogens
The problem in many cases is that people got too used to stability. We assumed (wrongly) that awful things like plagues were something people in the Middle Ages, with their limited medical technology, idiotic superstitions, and lack of hygiene brought on themselves. Today, we thought, we are a lot smarter about these things, and thus major contagion is something confined to the past.
What we didn’t know was that today’s cybernetic collectives can be more susceptible than ever to pathogens. We move people and goods faster than at any point in history (with the glaring exception of the economically unfeasible Concorde program). We also tend to value people coming to work no matter what, or structure pay and benefits for people in lower income brackets in such a way as to incentivize coming to work sick. On top of all that, economic considerations take a front seat, and led many jurisdictions to not take the actions that were needed early on to contain the spread.
All of this ultimately proved short-sighted. Keeping travel completely open from other countries ended up making for much larger impacts on the economy than restrictions would have cost. Sick people going about their business to avoid not being able to pay rent kept the spread going (and unemployment programs got people the money they needed — a number of weeks after it was needed).
Once the larger lockdowns started spreading (due to the failure to implement decent early interventions), this threw arrangements like just-in-time production and limited reserves into complete chaos. Problems spread through the collective in unpredicted ways. For example, most commercial CO2 production was a byproduct 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 want to be resistant to chaos, and keep order, we need to look for ways to improve our preparedness for supply disruptions. Having reserves on hand for some items would be a good idea. More flexible production systems are another. Better still would be to take early action to address the problem while it’s still small.
Featured image: Screenshot from Star Trek: First Contact. Copyright Paramount (Fair Use, Commentary)