TSMC’s top executive said that a prevalent shortage of budget chips is the reason behind slowed production in the $600 billion semiconductor industry.

TSMC CEO Wei recently revealed that there is a constant deficit of low-end economical chips priced anywhere from $0.50 to $10. According to Wei, the shortage is affecting significant segments of the supply chain, including the production of vehicles.

Moreover, Netherlands’ ASML struggles to secure enough $10 chips to manufacture EUVs (extreme ultraviolet lithography systems), a crucial element for packing more power into smaller units of silicon. Wei further added that the shortage of a single $0.50 cent radio chip can delay the production of a $50,000 car.

Failure to create demand and supply equilibrium

TSMC struggles to meet the growing demand of cheap chips at legacy factories. Hence, its building new facilities. One of the new facilities is a 28-nanometer factory located in China which will start manufacturing by Q4. Wei further proposed an increase in the price of budget chips in the upcoming months.

He added that deficiencies are more pronounced in the automotive industry. The addition of enhanced features within cars requires extra silicon, resulting in a 15 percent demand increase every year. Simultaneously, modern smartphone manufacturing requires two to three times more power management chips than five years back.

“The age of an efficient, globalized supply system has passed”, Wei added. “Costs are swiftly rising, including inflation.”

The demand is diminishing while logistics chokes and component scarcities continue to plague industry players. Applied Materials declared that its order backlog is growing, making it hard to get hold of semiconductors to produce equipment. Nvidia also said its facing difficulties getting support chips like transceivers and power converters.