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Reduced silicon production in China is driving higher chip production costs

Because it is important: Silicon makes up about 28 percent of the Earth’s crust by weight, making it the second most abundant material on the planet. However, the current energy crisis in China has had a major impact on the production of high-purity silicon, sending prices skyrocketing in the span of just two months. This further exacerbates the negative effects of shortages of other materials and components and is similarly expected to lead to higher prices for a wide variety of consumer and industrial products.

In recent months, we have seen a rapid deterioration of the technology supply chain, starting with a chip shortage and culminated in the boom in prices for rare earth metals and various passive electronic components. components. Last month, chip and electronics makers complained of a serious shortage of skilled workers that threatens to prolong the current situation well into 2022, which is a sentiment shared by nearly all industry players.

If that wasn’t enough, there’s a new problem looming over chipmakers: Silicon, which is crucial for making everything from $ 1 display driver chips and microcontrollers to wafer-scale motors for learning. automatic, it is now three times more expensive than it was just two months ago.

Image: Two engineers measuring a silicon ingot | Thor Nielsen

It may seem incredible that the world’s second-most abundant element could become scarce, but China recently embarked on an energy crisis to reduce air pollution ahead of the next Winter Olympics and increase reserves of coal and natural gas in wait. increased demand for energy during the winter months.

Production of high-purity silicon was greatly reduced as a result of energy restrictions, to the point that some companies outside of China have had to stop operations until they can ensure a stable supply. Manufacturers of glass, solar panels and automobiles are expected to see the rippling effects of this in the coming months, and manufacturers of silicone-based products are already feeling the impact on their business.

To get an idea of ​​the severity of this problem, for the past two decades, the price of silicon has remained in the range of 8,000 to 17,000 yuan ($ 1,200 to $ 2,600) per ton. Now that Chinese silicon suppliers in Yunnan province have cut their production by 90 percent compared to August levels, prices have risen to 67,300 yuan ($ 9,880) per ton.

Industry experts believe silicon prices will remain high until at least mid-2022, when production will accelerate again. Meanwhile, some manufacturers will be able to absorb the shock, while many will likely increase the price for end customers. Even Apple, which has mostly been able to get around current supply chain woes with relative ease, is expected to feel the pressure in the coming months.

Also Read: ASML’s Next Generation EUV Machine Will Give Moore’s Law A New Life

In general, it seems that the prices of everything that has a chip will remain high for a while. TSMC and Samsung have raised wafer prices this year to fund their continued efforts to expand their advanced process node manufacturing capacity, threatening to send CPU and GPU prices skyrocketing. It also doesn’t help that PC gaming has become more popular than ever amid the pandemic, which means you’ll be getting a good deal on a gaming monitor down the road than on a gaming PC.

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