Semiconductor Shortage: Examining the Cost Model

With additional inputs from Sakthi Prasad

COVID-19 pandemic has led to a surge in demand for personal computers and other electronics for work or school from home, resulting in chip shortage that now threatens to upend car production around the world. This unprecedented shortage situation has led U.S. President Joe Biden to sign an executive order on Feb 24, directing a broad review of supply chains for critical materials—from semiconductors to pharmaceuticals and rare-earth minerals—with the aim of spurring domestic production while strengthening ties with allies.

At this critical juncture, we at Beroe decided to publish the cost drivers of semiconductors -- because in times of product shortage, data pertaining to cost components can come in handy during supplier negotiation. For this analysis, we broadly examined the chip production in Asia, especially in Taiwan, as the country happens to be a heavyweight in the semiconductor sector.

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