Unless you’ve been off the grid for the past few months, you would’ve heard of the global chip shortage. It’s been splayed across headlines around the world, with new articles about it popping up daily. More interestingly, people are linking it to cryptocurrency, with some blogs going so far as to pin the shortage on bitcoin mining. In this article, we’ll be breaking down exactly what the chip shortage is about, how widespread it is and more importantly, what it’s effects on cryptocurrency are.
What exactly is the issue?
First, let’s establish what we mean by “chips”. We’re referring to semiconductor chips. These are the “brains” of your electronic devices. They’re vital to how your digital devices perform since they’re responsible for everything from snapping a photo to playing a game on your phone.
At this point, you’re probably wondering how many of your devices use these chips to function. The short answer is: almost all of them. Whether it’s your phone, tablet, car, PS5 or computer, semiconductor chips literally run the world.
So, you can imagine how catastrophic a global chip shortage must be.
The shortage was mainly caused by COVID-19. The virus outbreak meant that manufacturing plants had to close down, workers were retrenched and as a result, chip manufacturing companies couldn’t meet their pre-COVID output level. Things got progressively worse since the output for these chips remained the same and companies couldn’t match it with supply.
Where things really took a turn for the worse was when countries went into lockdown. With governments around the world being uncertain on how to handle the new outbreak, it wasn’t long before months passed, resulting in millions of backlogged orders on these chips.
That sounds bad. What’s happened so far?
The ripple effect of the shortage is still unfolding, but from what we’ve seen thus far, it’s led to a few things. One, products are taking much longer to ship. This makes sense, seeing as assembly plants need to receive all the necessary materials before they can start putting products together. The second outcome is that some products don’t ship at all. Orders get canceled, people are upset…it’s not a pretty picture.
How long will it last?
With the COVID-19 situation continually evolving, we can’t say for certain, but we know it’s significantly impeded some companies from meeting their regular output levels.
Nissan has cut their production down by 30% throughout November in order to combat the shortage. Despite this, they’ve said that they’d still be producing 500,000 less vehicles due to the chip shortage. Even companies like Apple are having a hard time keeping their products in stock, just a month after releasing their latest line of iPhones.
So, why is crypto stealing the spotlight? Is crypto causing the chip shortage?
Well, cryptocurrency mining relies heavily on the supply of semiconductors. You need powerful hardware to mine crypto – it’s an intensive task that heavily taxes the CPU and GPU of a computer. With more and more people noticing crypto’s profitability during the pandemic, more people are getting into crypto mining – which means even more chip orders, worsening an already bad situation.
Will this have any effect on cryptocurrency? How does this affect hardware wallets?
While cryptocurrency is digital in nature, hardware wallets are very much physical objects. This means that they require semiconductor chips much like other electrical devices. So, you can expect to see your favourite hardware wallets go off the market or be prepared to experience delayed shipping.
What’s the solution? Will it resolve itself?
Unfortunately, there doesn’t seem to be much we can do under the circumstances. With more people getting vaccinated around the world and production levels slowly rising, we can expect to see the effects of the global ship shortage easing up – though we wouldn’t expect to see a marked improvement until we’re well into 2022.
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P.S. Did you know we wrote a beginner’s guide to cryptocurrency? You should probably look into that: https://old.ukiss.io/the-comprehensive-crash-course-to-cryptocurrency/