Silicon Price Spike Is Latest Terrible News for Tech Prices

The semiconductor of choice for the transistors we rely on in just about every electronic product available today, silicon, is the latest metal to suffer a production shortage, according to Bloomberg and mining.com, despite being the second most abundant element in the Earth’s crust.

You can’t just go grinding up sand to let the MOSFETs out, however, which is why 20% of the silicon produced worldwide is refined to metallurgical-grade purity, and 15% of that is further refined to be used in semiconductors, at a purity of over 99%. 

And that’s what we’re going short of. Thanks to a reduction in production in China, the world’s largest producer of silicon metal, the price of the shiny stuff has risen 300% in less than two months, leading plants in Scandinavia to cut production of chips.

This is bad news not only for the microchip sector, but other large users of silicon such as car manufacturers, who alloy silicon with aluminum to make engine blocks and other parts, and the solar energy industry, where refined monocrystalline silicon is used in panels. It also makes up the basic building blocks of many medical implants. 

The production cut appears to be linked to electricity supply, with Reuters explaining that shortages of coal, combined with increased demand from industry, has led to curbs in the amount of electricity that can be used. China’s power system prevents increases in the price of coal being passed on to consumers, so the power companies themselves are left to either absorb financial losses or reduce output.

The news of a silicon shortage comes as Japanese silicon wafer maker Sumco announces it will be spending over $2 billion to increase its production of 300mm silicon wafers at its plant in Japan’s Saga prefecture, scheduled to be in full operation by 2025.