Without a steady supply of new chips, our savings would stop. To get an idea of ​​the importance of chips: MOSFETs, semiconductor components of all modern chips, are the most frequently manufactured device in history. It is increasingly difficult to find a modern electronic device that does not contain any chips, because I personally discovered it the hard way when my toaster broke down because it needed to replace its circuitry. So when we talk about chip shortages, it’s not just about computers and cellphones – it’s almost everything around us that runs on electricity.

A supply chain crisis involving the chip industry is a serious problem. How did we get here?

The cause

As shortages and price hikes permeate more and more industries, it seems that we are always given an explanation that touches on the particular circumstances of the given field, without addressing the elephant in the room: the economic fact of The basis behind chronic shortages and rising inflation is that money printing is no substitute for the manufacture of real goods.

Whether due to real health risks or political power games, the fact is that manufacturing companies, seaports and blue-collar workers around the world have been repeatedly barred from doing their jobs over the past 20 years. months, resulting in a decrease in manufacturing and shipping. To make matters worse, consumer spending has been increased by printing money and cheap debt.

To get an idea of ​​the gap between supply and demand, take a look at the following table. It maps data on payrolls and retail sales in the United States – which have always been highly correlated – revealing a major split in measures over the past year.

Are you wondering how it is possible that retail sales are skyrocketing while the payroll is collapsing? The debt ratio and money printing have increased significantly since early 2020:

These charts show that we have now entered uncertain territory where official economic policy appears to be to completely ignore the laws of supply and demand. But what seemed to work in the first few months of 2020 quickly bites us down: when more money chases less goods, we will inevitably see high prices and missed deliveries.

Combine ignorant economic policy with the innate inability to rapidly increase production in the highly specialized, capital-intensive chip industry, and you have a shortage that will not be resolved anytime soon. Indeed, interest rates will likely stay near zero for the foreseeable future for fear of widespread bankruptcy, so demand will remain artificially high, while manufacturers remain burdened by mandatory Covid-19 policies that limit their manufacturing capacity.

Gravity

Even though we live in an inflationary environment, massive productivity growths in the consumer electronics industry have consistently made our computers, phones, and gadgets cheaper and / or more efficient over the years. This effect may have stopped now, at least temporarily. In the following graph, we can see that since the end of 2020, the producer price index (PPI) of semiconductor manufacturers has started to increase.

Rising prices and extended delivery times are causing problems in all industries. Here are some examples :

• Raspberry Pi raised the price of its home computer for the first time in the company’s history and reintroduced an older model.
• Japanese automakers are moving away from just-in-time manufacturing – which they pioneered in the 1930s.
• Intel, Nvidia, and AMD agree the chip shortage will last at least a year.
• The global auto industry is expected to lose $ 210 billion in lost revenue due to the chip shortage (revised from $ 110 billion previously forecast in May).
• A shortage of kitchen appliances is causing how-to guides appear on the Internet. There is something really wrong with the economy if you have to apply tactics specific to how you buy a replacement dishwasher!

Most industries expect the shortages to last through most of 2022, and possibly into 2023. But things could get worse if something happens to TSMC, the world’s largest semiconductor maker, based in Taiwan. The biggest risk is that China will seize Taiwan after Hong Kong’s successful assimilation, and with Sino-Taiwanese tensions at their worst in 40 years, this risk is not to be taken lightly.

The impact on Bitcoin

In the Bitcoin industry, the effects are magnified by the price hitting historic highs twice this year, with strong growth in demand for everything Bitcoin-related, be it ASICs, nodes. complete or hardware wallets.

ASIC miners have been rare for some time now, with prominent Bitcoiners already commenting on this issue in early 2021:

China’s crackdown on domestic mining in June may have alleviated the shortage for the foreseeable future as many ASICs change ownership in the aftermarket. Additionally, a true ASIC shortage would in no way endanger the security of the Bitcoin network, as a drop in the hash rate would simply lead to an adjustment in mining difficulty. Blockages would continue to operate on a ten-minute schedule.

Popular full-stack Bitcoin solutions like Umbrel are starting to be affected, mostly indirectly by the Raspberry Pi shortage, as that’s the hardware these solutions typically rely on.

This could slow Bitcoin adoption globally somewhat, although Bitcoin Full Nodes and other Bitcoin related software such as Lightning or BTCPay Server node implementations can also be run on a laptop.

Hardware wallets could be the hardest hit industry for the foreseeable future as wallet makers do not wield the bargaining power of smartphone companies and there is no good substitute for user-friendly Bitcoin cold storage. Of course, experts can make their own Trezor or create a safe environment using an airspace laptop running Linux, but such an approach is not viable for most people who just want do the right thing and withdraw their coins from an exchange. To meet all the demand and keep inventory from running out, we can expect back orders and moderate price increases in this industry in the coming months.

The Fiat illusion

The current supply chain crisis is just another reminder that there is no way around the laws of economics, just like there is no way around the laws of economics. physical. Reality trumps illusion in the end, and all debts incurred must be paid somehow.

Fiat money is today’s biggest illusion. He seduces us with the lure of profit for nothing; consumption without production. We must wake up from this collective hallucination before it is too late to repair our savings. Bitcoin is the wake-up call – with sufficient adoption of bitcoin, the information superhighway of the undisturbed price system will operate again and the problem of chronic shortages will be made history.

“Fiat money is Babel, Bitcoin is clarity”

This is a guest post from Josef Tětek. The opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.