There are chips in almost everything you own, from your phone to your computer to your car. There are even shavings in items you wouldn’t expect, like your washing machine, electric toothbrush, and refrigerator. But those tiny pieces that power so much of our lives are now in critical shortage.

“Right now, we have a global supply chain in crisis,” says Patrick Penfield, professor of supply chain practice at Syracuse University. “We’ve never seen anything of this magnitude affect us before. “

Nissan has announced that it will manufacture 500,000 fewer vehicles due to the chip shortage. General Motors had to halt part of its pickup truck production due to the lack of semiconductor chips and even parked thousands of vehicles that were completed but still lacked the necessary chips. Apple CEO Tim Cook warned the public in July that chip shortages would affect sales of his phones and tablets.

Intel chief Pat Gelsinger predicts it will be a year or two before supply can meet demand, and experts say holiday shopping may not offer variety and options we’re used to.

Here’s how the flea shortage happened and when it might be over.

What are these chips?

Chips, often called semiconductors, sometimes called microchips, work like the brains of our electronics. They are tiny technological marvels, housing billions of transistors, although the size of the chip can vary. (These transistors are like tiny little gates, allowing electrons to pass through them or not.) Their construction involves several steps, days, and experts at hand. For example, IBM’s latest chip contains 50 billion transistors in a space two nanometers the size of a fingernail.

“I imagine there are more than 100 billion chips in daily use around the world,” says Matteo Rinaldi, professor of electrical and computer engineering at Northeastern University. “So think about how many transistors and semiconductors we use every day in our lives. ”

These chips are the lifeblood of modern society, but even before the pandemic demand exceeded supply. This year, economist Rory Green called semiconductors the “new oil,” pointing out that Taiwan and Korea now control the lion’s share of chip production. But while these chips were an American invention, the number of American manufacturers currently creating them has declined sharply. In 1990, 37% of chips were made in the United States, says James Lewis, senior vice president and director of the strategic technologies program at CSIS. In 2020, that number was only 12%.

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For decades, the tech industry has been guided by a prediction made by Intel co-founder Gordon Moore in 1965; he estimated that “the number of transistors built into a chip will double approximately every 24 months.” And building a factory capable of creating these chips, which have been shrinking over the years, can cost $ 10 billion, prohibitively expensive for most companies. “These are state-of-the-art multibillion dollar facilities,” explains Lewis.

What is the shortage of chips?

As the world closed due to the COVID-19 pandemic, many factories closed with it, rendering the supplies needed to make chips unavailable for months. The increase in demand for consumer electronics has caused changes that have spilled over into the supply chain. Orders began to pile up as manufacturers struggled to create enough chips to meet new levels of demand. A backlog started to grow and grow and grow.

Auto makers, like Ford, need to forecast how many chips they will need to produce their cars and order them in advance from one of the chip makers. Right now, it can take at least six months for an order for chips to arrive, says Penfield. The current demand for chips is so great that manufacturers cannot make enough chips to meet them just yet, which means consumers will soon see higher prices for fewer products.

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But the problem wasn’t just about manufacturing. As COVID made its way through Asia, ports closed, sometimes for months. About 90% of the world’s electronics pass through the Chinese port of Yantian, which was recently closed, leaving hundreds of container ships waiting to dock.

Once the ports reopened, bottlenecks arose due to the accumulation of items waiting to be shipped. Many parts of the transportation supply chain lack the capacity to deal with this build-up or the labor shortages that have arisen, plunging the supply chain into a new crisis.

What caused the shortage of fleas?

“Bad decisions, bad luck, then increased demand. Put these three together and you have a shortage, ”Lewis says. The pandemic has caused an explosive increase in demand for devices. People were at home, using more tablets, phones, and other streaming devices than ever before, and the need skyrocketed beyond what manufacturers could provide.

Bad decisions by the auto industry have also contributed to the shortage. When COVID started, many companies canceled their chip orders because they believed the economy was about to take a long hit, says Lewis. Automakers in particular have canceled orders, so chipmakers have turned to manufacturing chips for consumer products, trying to meet the explosive demand caused by the pandemic. After retooling their factories to make chips for consumer goods instead of cars, a shortage of chips for cars ensued.

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There aren’t many chip-making factories around the world, and the few that were operating during the pandemic were subjected to a series of unlucky weather events that further delayed the manufacturing process. Japan’s Renesas plant, which produces nearly a third of the chips used in cars around the world, was badly damaged by a fire, while winter storms in Texas forced some of America’s only chip factories to stop their production. The production of these chips also requires a lot of water, and a severe drought in Taiwan has also affected production.

Is China playing a role?

While geopolitical concerns aren’t the primary cause of this chip shortage, one of the lingering concerns is Taiwan’s strained relationship with China. Taiwan is the world’s largest producer of chips, and the theoretical possibility of a China-Taiwan war jeopardizes U.S. access to the chip industry and could spell disaster for many industries that couldn’t get the chips. they rely on. “China is deeply tempted to just take over Taiwan,” Lewis said. “The Chinese are desperate to have their own chip industry. It has become a focal point of competition between the United States and China.

President Joe Biden is making an effort to invest in the manufacture of American chips, asking for a $ 50 billion investment in the chip industry. The Senate passed a bill providing tax credits and other incentives to chipmakers.

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U.S. chipmaker Intel has announced plans to ramp up chip production, while Taiwan Semiconductor Manufacturing Co and Samsung are looking for locations for U.S. factories they plan to build. But while these plans are promising, it will be years before these factories can increase their production levels.

What are the effects of the shortage?

“Prices are certainly going to be higher for many devices that require a semiconductor,” says David Yoffie, a Harvard Business School professor who spent nearly three decades on the Intel board. “Some products literally won’t ship or will be delayed. ”

The auto industry is being hit hard, with estimates indicating that U.S. manufacturers will manufacture at least 1.5 to 5 million fewer cars this year. Ford and General Motors already have limited production. Tesla revised its own software to support alternative chips to maintain production levels.

And while consumer electronics companies like Apple and Samsung started stockpiling chips early on, saving them from the immense delays facing the auto industry, Apple recently announced that the chip shortage is expected to delay production. iPhone and is already impacting iPad and Mac sales. Xboxes and Playstations are also rare.

“It’s going to be a tough holiday season,” says Penfield. “One thing I caution consumers about is that you probably won’t see the strain you’re used to. If you can buy before the holiday season really starts, I think you’ll be in good shape.

When will the problem be resolved?

Opinions on ending the shortage vary. The CEO of chipmaker STMicro has estimated that the shortage will end in early 2023. The CEO of automaker Stellantis said the shortage “will continue until 22, it’s easy.” Intel CEO Patrick Gelsinger said the shortage could last another two years.

“We probably have about nine, 10 months to live,” says Lewis. “If you can afford to wait, the prices will go down.”

Yoffie expects some of the demand to start slowing over the next 6 to 12 months. But he estimates that it will probably take two years before supply catches up with demand and equilibrium is reached.

“When you get down to three nanometers and two nanometers, which are the levels we’re talking about for next-generation technology, that’s rocket science, and rocket science is something that doesn’t end in one. nanosecond, ”says Yoffie. . “You have to be patient.”