Semiconductor Chips – The What, The How, The Why and The When Answered

A microchip on a circuit board

Once upon a time most people would know that microchips were something to do with computers. Or they were a brand of chips you cooked in a microwave. For avoidance of doubt, it is the former rather than the latter I will be discussing here.

Now, of course, we live in an enlightened age where we know the importance of microchips. In fact, semiconductor chips are discussed on a weekly, if not daily, basis in the world of electric vehicles. An unexpected shortage has almost ground electric vehicle production to a halt around the world.

So what exactly are semiconductor chips? How are they made? Why is there a shortage and when will the shortage end? Hopefully I can answer some of your queries here.

microchip processor being held in a pair of tweezers

What is a Semiconductor Chip and How is it Made?

This is an important question to address. Although we are more switched on to microchips, the exact purpose sometimes can elude people. 

First of all, semiconductor chips and microchips are the same thing, just different names. They literally are small chips that act as conductors. These small components are the brains of machines. 

Usually made from a silicon base with lots of layers of tiny circuits, these chips control the electricity that powers various electronic devices, from cars and smartphones all the way to fridges. They also act as processors for specific tasks assigned to them. 

A modern electric car requires up to around 3,000 of these semiconductor chips to function properly. Each chip having a different function in the overall operation of the machine. As modern electric vehicles become more and more complex, the more semiconductor chips it will require to work.

Technician affixing microchip to a circuit board

Why is There an Issue With Semiconductor Chips Now?

It probably hasn’t escaped your notice that there has been an issue with a shortage of semiconductor chips in the last couple of years. Even major news outlets such as Sky News and the BBC have reported on the problem. So what is the cause of the issues?

There are several major issues that have led to this situation. Something that has been described by some as a “perfect storm” in the electronics world. Here are the three main causes.


Firstly, and most importantly, electric vehicles have just become far more popular. The last two years in particular have seen an explosion of interest in electric cars and vans with orders for these vehicles going through the roof. 

To be honest, I am not too sure that even the manufacturers themselves saw this demand coming in such a huge way as it did.


Secondly, the war in Ukraine has caused all sorts of issues. It is believed that around 90% of one or two of the most important materials required in the manufacture of semiconductor chips comes from Ukraine. 

The war in the country has led to a major supply issue for the major semiconductor chip manufacturers in China and the USA.

The Pandemic Fallout

Thirdly, and I am sorry for bringing it up again, there is the Covid 19 pandemic (along with a lack of foresight by the vehicle manufacturers). When the world shut down in the early stages of the pandemic, this pretty much halted all car production. This in turn meant that manufacturers stopped buying in the components to build the cars, such as semiconductor chips. 

However, the pandemic was a boom time for electric device companies. Businesses that built home computers, tablets, games consoles and phones saw a big increase in sales due to people being locked down at home. These companies went straight to the top of the chip manufacturers preferred supply list, leaving car manufacturers at the back of the queue.

Now we are mostly on the other side of Covid, and vehicle building has started up again, the vehicle manufacturers are struggling to get hold of the semiconductor chips they need in the quantities they require.

A picture of a bully disk with microchips on it

When Will the Issue be Resolved?

This is the ultimate question on many people’s lips at the moment. When will this shortage end and when will we see the production of cars reach normal levels?

Interest in electric vehicles is still increasing. As we move closer to the 2030 ban on the sale of new petrol and diesel vehicles, this interest is only going to keep going up. The manufacturers won’t get any respite in this department.

Unfortunately the war in Ukraine is ongoing and doesn’t look like coming to an end any time soon, although we obviously wish peace to the Ukrainians as quickly as possible. This means that the supply of materials to make the semiconductor chips will continue to be in short supply.

However, there is light at the end of the tunnel. The pandemic is nearly at an official end, the world is moving again and the demand for electronics such as gaming machines, tablets, PCs etc have dropped considerably. This means that production of the semiconductor chips for the manufacture of cars will increase.

Some industry insiders believe that the shortage is beginning to lessen in the last half of 2022. This trend will continue throughout 2023 before semiconductor production fully meets electric vehicle demand in 2024. So, unfortunately, there is still a way to go. However, the issues are already beginning to lessen to a certain degree.

robot arm holding a microchip
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