The Importance Of Microchips For Future Technologies

What are microchips and what are they used for?

A microchip, or semiconductor, is generally the most important component of a technical device. It is the semiconductor’s ability to conduct electricity that makes the device work. This also means that without semiconductors, most electronic devices as we know them today would not work.

Challenges for the industry

Microchips are essential for technological progress and a key pillar of Industry 4.0. We have already seen the importance of semiconductors to industry, with supply shortages affecting the automotive and electronics industries. According to Goldman Sachs, 169 industries were affected by the microchip shortage, including not only the automotive industry, but also industries such as medical technology, agricultural machinery, consumer electronics, energy and enterprise information, to name but a few.  An example of the scale of this shortage is Renault, the company suffered significant production losses due to the lack of semiconductors. In 2021, the figures were estimated at around 500,000 cars that could not be produced due to the lack of chips.

In situations like the Corona pandemic, it was possible to see how different countries dealt with such exceptional situations. It happened that some countries were able to keep production largely intact, but others had severe production problems due to their measures. Considering that the largest microchip manufacturer (TSMC) was located in Taiwan, a region with one of the strictest corona regulations, this led to a sharp drop in production, which in turn had a huge impact on the electronics and automotive industries worldwide. In addition, Taiwan is caught between mainland China, which sees Taiwan as a split-off part of China and has declared to bring it back under Chinese control, and the US, which is heavily dependent on semiconductors from Taiwan, along with most other countries in the West.

In this situation, it became clear how important the even distribution of microchip production cities is for maintaining a smoothly functioning production chain. Semiconductors are therefore essential for the (further) development of technology, and it is impossible to imagine today’s industry without them.