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The global chip shortage and its effect in Africa

The global chip shortage and its effect in Africa
By get.Africa Weekly • Issue #75 • View online
Habari za asubuhi,
That’s ‘good morning’ in Swahili
Earlier in the year, Kenya opened its first semiconductor factory. 
The factory is situated at the Dedan Kimathi University of Technology (DEKUT) in Nyeri and is a public-private partnership (PPP) between the university and American firm 4Wave Inc.
The factory is a big step into the future, but it is also timely in that the world is currently experiencing a shortage of semiconductor chips. 
However, it will take several years and several more factories like it before Kenya can position itself as part of the solution.
How did we get here?
I studied computer engineering at a university of science and technology similar to DEKUT. There, too, we researched semiconductors, although without the benefit of a factory in our backyard.
I graduated in 2009. Back then, we studied the use of semiconductor chips in only a small number of appliances such as personal computers and mobile phones. But today, semiconductor chips are embedded in nearly everything, our watches, our TVs, our cars, and, if you believe the anti-vaxxers, even in our bodies.
These use cases have created a massive demand for semiconductor chips. And, in recent months, manufacturers have struggled to keep up.
Many analysts have blamed this shortage on Covid-19, the working theory being that stay-at-home orders and border closures impeded manufacturers. 
But Mark Liu, chairman of TSMC, the world’s biggest contract chip manufacturer, has a slightly different view. Rather than pointing a finger at 1 thing, he’s pointing it at 3, namely:  
  1. The Covid-19 effect on the semiconductor production,
  2. The unpredictability and uncertainties due to the US-China trade war and,
  3. The accelerated digital transformation that has been brought about by the pandemic. 
#2 is particularly important since Taiwanese companies like TSMC control 60% of the global semiconductor chip market. 
Read more on Liu’s comments. 
Knock-on effect
Apple is one of TSMC’s biggest clients. It’s, therefore, no surprise that iStores in South Africa have reportedly experienced shortages in iPhone stock. I expect other mobile device makers to suffer similar issues.
The effects are also being felt in other verticals such as computer hardware, communication services providers, and the auto industry. So far, they’ve manifested in two ways:
Long delays and cancellations: In Egypt, local car manufacturers have reportedly been forced to slash production. And in South Africa, Unlimited Air Fiber, a new ISP, says the chip shortage is the reason why it has struggled to fulfill orders.  
Price increases: Predictably, this disruption has started to cause price hikes. According to one South African hardware distributor:
“In my 34 years of working within the IT industry, I have never experienced or seen such shortages… As a result of the shortages, pricing has gone through the roof.”
Unfortunately, with many analysts expecting the semiconductor chip shortage to get worse before it gets better, those prices are set to keep going up. 

get.Africa is a weekly roundup of the most important stories in African tech. To support, follow us on Twitter, subscribe to our YouTube channel, share this issue or send us an email. You can also check our archives.
Credit: Charles Deluvio
Credit: Charles Deluvio
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