In Swindon, Honda’s main UK plant has sat idle for days as a lack of parts prevents its 3,500 workers from assembling new vehicles. On the social network Reddit, video gamers desperate for the latest graphics cards swap tips on what cities they should fly to in order to procure precious stock. Schools around the world, unable to get hold of Chromebooks, have struggled to get laptops into pupils’ hands.

These are different problems, but have the same root cause: a global shortage of microchips that is rippling across multiple industries and which experts say may take more than a year to recover from.

The intricate and expensive business of making chips is going through its biggest supply squeeze in years, with production bottlenecks and record demand pushing up prices and holding up supply chains in multiple other industries.

“It’s not unusual for things to get tight, but it’s unusual for things to get tight this quickly,” says Chris Caso, an analyst at Raymond James. “There has been such a gap between what people thought was going to happen and what is actually happening.”

Supply squeeze

The $433bn (£317bn) semiconductor industry, which produces the brains behind the world’s electronics, is a delicate balancing act between demand and supply. The highly-specialised equipment and factories that produce chips’ microscopic transistors and switches are carefully calibrated to maximum efficiency. In recent years, this process has become even more finely tuned as the consumer electronics boom has demanded more efficient chips in higher numbers.

It is a system in which shocks are not welcome. So the way the coronavirus pandemic has upended consumer habits has left chip manufacturers scrambling to respond to them. Lockdowns have dramatically boosted sales of PCs and games consoles, whose graphics units are among the most highly-specialised chips. AMD and Nvidia, which supply graphics chips, have said supply will be constrained well into 2021.

Donald Trump’s efforts to crush Huawei by blocking companies from supplying the Chinese giant’s chip unit, HiSilicon, has squeezed supply of smartphone components, right as 5G devices, which require more advanced chips, become mainstream. But it is the car industry that has been most affected.

In recent weeks, multiple carmakers have shut down production due to a lack of the chips used in everything from entertainment systems to electric motors. Volkswagen has said it will make 100,000 fewer cars this quarter as a result of the shortage. This week, Ford said it would close a plant in Germany for a month.

Ben Jackson, a former chip industry executive and consultant on automotive semiconductors, said car companies had cut orders in the early months of the pandemic, fearing a significant drop in demand than materialised. While car sales did indeed fall last year, the drop was well below what the industry had prepared for.

“The semiconductor industry does not like sudden changes in demand. Ramping up and down production lines in a matter of days is really not something you do,” he says. “Bringing in additional capacity in semiconductors is not something that can just happen overnight. You're into billions of dollars to build new front end capacity.”

The consumer electronics boom

In some cases, chip manufacturers such as Taiwan’s TSMC have altered production to focus on the more lucrative consumer electronics boom, taking capacity that could have been used for cars. In others, automakers were simply slow to place orders, worried about the tenuous state of the economic recovery.

“The automotive industry is actually pretty brilliant at planning. But how do you plan for the pandemic?" says Bryce Johnstone, director of automotive at British microchip company Imagination Technologies.

The crisis is amplified by the increasing amounts of silicon that exist in modern cars. Automatic braking systems, touchscreens and internet connections mean that the average car has more than $600 worth of chips in it, up from less than $300 a few years ago, according to Johnstone.

The electric car boom means that each car requires more chips devoted to managing power supplies, and manufacturers are competing on other high-tech elements such as driver-assist software, which also requires extra brainpower.

Booming demand for chips has also seen the cost of their base materials rise, and chipmakers have, in turn, passed the price hikes on to car and electronics manufacturers. Since they find it more difficult to raise prices for consumers, some are simply cutting production until they can resume it profitably.

Getting back to normal, however, is likely to take time. Optimistic forecasts are for supply to catch up in the next six months, but laptop manufacturers have warned it could take until 2022. TSMC, the world’s largest chipmaker, said last week it expected capital expenditure of up to $28bn this year, compared to $17bn last year, in part to address the automotive crunch.

Britain left exposed

Growing fears about global chip shortages could heighten concerns about where they are made. TSMC does most of its manufacturing in its home country of Taiwan, and Samsung, the second biggest contract manufacturer, in Korea. China has made domestic production a strategic priority, an initiative that Donald Trump sought to curtail by blacklisting several Chinese tech companies.

Drew Nelson, the chief executive of IQE, one of Britain’s few semiconductor manufacturers, says the UK’s lack of production capacity leaves it exposed. “If the UK has to rely on foreign countries, which may or may not be friendly in the future, for all of its semiconductor hardware, it is going to be in a strategically extremely weak position,” he says.

“It's an absolute tragedy because 30 years ago, when TSMC was founded, the UK led in the manufacture of silicon chips.The Government hasn't really grasped the importance of investment in sovereign capabilities, in its own semiconductor industry.”

Nelson says the UK’s ability to produce its own chips should be a matter of national importance. The idle car factories and laptop shortages caused by the current shortage may well be seen as evidence of that.