global chip shortageThe COVID-19 pandemic created a global chip shortage that has ultimately exacerbated poverty. Most notably, the tech divide has widened as economic sanctions worldwide slowed production or halted it entirely, leaving many out of work. Fortunately, countries and manufacturers are stepping up to address the pandemic-induced global chip shortage.

The Cause of the Global Chip Shortage

Chips are known as the “brains” of electronic devices and are essential to several industries, including the cellphone industry and the motor vehicle industry. The shortage initially began because of a delay in production caused by factories shutting down due to the emergence of the COVID-19 virus in 2020. Simultaneously, remote work increased the demand for telecommunication, ultimately creating a strain on the supply and demand ratio.

The U.S.-China tech war also played a major factor in the global chip shortage. The U.S. Department of Commerce blacklisted SMIC, which is one of the largest semiconductor manufacturers in Asia. The inability to source U.S.-based parts to manufacture small chips had significant ramifications for the supply chain. Several companies, including Huawei Technologies Co., had anticipated such actions and began stockpiling chips as early as 2019.

Effects on the Global Economy

The chip shortage has harshly impacted several East Asian countries, largely because 75% of global semiconductor chips are produced in East Asia. Because of COVID-19, 2020 saw a $2.1 trillion revenue loss across Asia, putting an estimated 23 million individuals out of work.

The U.N. realized the economic strife that the COVID-19 pandemic brought upon the world. The U.N. predicted that 71 million individuals globally would be “pushed back into extreme poverty in 2020.” The pandemic even put previously financially secure individuals at risk of poverty.

Several motor vehicle manufacturers, including Ford, Nissan, Toyota and Honda, halted production at the beginning of the COVID-19 pandemic. When the companies eventually increased their semiconductor chip orders, suppliers such as Taiwan Semiconductor Manufacturing Company (TSMC) could not keep up. Due to the impact of chip shortages, Ford failed to produce upwards of 1.1 million cars, giving way to a potential $2.5 billion loss.

Chip Shortage Impact on the Tech Divide

Almost 60% of the global population has access to the internet, with Europe and Asia leading the highest internet penetration rates in 2020. China has around 854 million internet users out of a 1.4 billion population. In lower-income countries, however, internet penetration rates are far lower.

The COVID-19 pandemic created the global chip shortage, which in turn, caused high inflation. A significant factor in widening the tech divide is the high cost. GPUs, PS5s and Xboxes have skyrocketed in value, with some products tripling in price in a little over a year. For example, the Nvidia RTX 3060 Ti graphics card had seen an increased retail price of $399 to a street price of $1,226 by March 2021. These higher prices create barriers to internet access and other technological abilities for those in lower-income countries, thereby exacerbating the digital divide.

Resolving the Shortage

In order to address the global chip shortage, in February 2021, President Biden signed an executive order to expand semiconductor chip production within the United States. The U.S. accounts for 47% of the world’s semiconductor chip sales yet just 12% of all chip manufacturing. In order to solve the shortage, Biden sought “$37 billion in funding for legislation to supercharge chip manufacturing in the United States.”

In April 2021, TSMC announced a plan to invest $100 billion in chips over the next three years to address the global chip shortfall. In 2020, TSMC spent around $17 billion in producing semiconductor chips and originally only planned to spend between $25-28 billion for 2021. The budget changed to account for the shortfall and the increased demand in telecommunications.

The global chip shortage is projected to linger until 2023. Despite this prolonged shortfall, many companies look forward to operating at full capacity as COVID-19 vaccines become more globally available and the global chip shortage decreases.

– Camdyn Knox
Photo: Flickr

Southeast Asia has been reducing its poverty level as a whole for the past decade. However, the rise of automation has now put the population back at risk. One of the largest industries in terms of employment in Southeast Asia is the production and manufacturing industry. The most common type of work found in this region is in small factories. These jobs are some of the most vulnerable to the effects of automation in Southeast Asia.

Affected Industries

Automation is the process by which labor or a job that is performed by a human switches to being done by a machine. In many cases, a robot is able to work faster and more efficiently than a person with the added bonus of not having a salary and never needing time off. Thus, the prospect of a workforce full of machines is very appealing to those looking to lower their labor costs.

Automation in Southeast Asia stands to put a large number of laborers out of work. The International Labor Organization reported that 73% of Thailand’s manufacturing workforce are at high risk of having their jobs automated. On a whole, the ASEAN-5 (Cambodia, Indonesia, the Philippines, Thailand and Vietnam) faces a 56% risk for employment being automated in the next two decades. The majority of workers affected will be those with both lower wages and lower levels of education. These are the types of jobs easiest to automate, which renders these workers as the most severely impacted demographic.

Further, the types of jobs created through automation, like machine operation and maintenance, require skills the lesser educated workers replaced by automation lack. In Vietnam, those with only a primary school education are three times more likely to have their job automated than someone with a secondary degree.

The Transition

These countries face an interesting problem. Through automation, they stand to gain much in the way of foreign investments and business. Southeast Asia has become a hub of global production, which provides many economic benefits. On the other hand, automation puts the lives of the working-class people in these countries in serious danger. Several countries in Southeast Asia have proposed new ideas to try and navigate through this transition.

The Indonesian Minister of Finance has proposed the implementation of a universal basic income. This has the possibility of alleviating the stress caused by job loss. The Government of Thailand has approved a tax incentive to boost automation within the country. The proposition aims to bring in foreign investors that would train Thai workers and create employment opportunities.

Conclusion

A smooth transition to automation will be crucial in keeping much of the population of Southeast Asia above the poverty line. It is fundamental to support workers in the age of automation in Southeast Asia. Most importantly, they need access to higher levels of education. Hopefully this issue will encourage these governments to provide more opportunities and training to their citizens. People can continue to work in meaningful ways in the age of automation through adequate aid.

Jackson Bramhall
Photo: Flickr