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12 July 2022

Why is it so hard to fix the chip crisis?

Despite commitments from governments and funding to support the semiconductor sector, the ongoing chip crisis is not going away any time soon. The European Commission (EC) has proposed a European Chips Act to encourage the development of a thriving semiconductor sector from research to production and a resilient supply chain, and in the UK, the Foreign Affairs Committee has begun an inquiry assessing skills, security and end-to-end semiconductor supply chain concerns. McKinsey recently forecast that the global semiconductor industry would be worth $1tn by the end of the decade. Its assumption is based on average price increases of about 2% a year, combined with a return to balanced supply and demand after current volatility. However, a recent McKinsey article warned that supply shortages had led to bottlenecks in the production of everything from cars to computers, highlighting how tiny silicon chips are critical to the smooth functioning of the global economy. “In many ways, our world is ‘built’ on semiconductors,” the authors ...

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