Trade, Development, and Immigration

Take chip shortage doom narrative with a pinch of salt


Energy and Environment

Andy Mayer quoted in City AM


Matthew Lesh writes for CapX

IEA Head of Public Policy Matthew Lesh has written in CapX urging people to ignore apocalyptic predictions of a Covid chip shortage.

Matthew wrote:

“The narrative about chip shortages is built on an entirely false narrative. The Government’s forthcoming chips strategy, and subsidies from the EU and US, largely comes from the idea that Covid demonstrated the vulnerability of global supply chains. The accepted wisdom is that global Covid chip shortages were responsible for manufacturing delays, particularly in the car industry. But this claim obscures more than it reveals.

“The shortage was not because the microchip supply chain was majorly interrupted. There were some temporary slowdowns caused by various lockdowns. But overall global chip production actually increased over the period. In 2021, 1.1tn semiconductors were sold worldwide, according to IC Insights – an increase of 13% compared to 2020.

“Global supply chains are highly adaptable and dynamic – or, to put it simply, it’s pretty unlikely we are going to face this sort of problem again. The supply chain for chips is radically diversifying and carmakers are unlikely to mistakenly cancel their orders again in future.”

You can read the full piece here.