The part I don't understand is why didn't it fix itself relatively quickly once they realised the demand for ICs was there? Is it just because the demand is far greater than they ever had so the backlog is growing more quickly than they can produce?
Others have talked about it mainly affecting high-end silicon rather than all components but I assume that most equipment now needs at least 1 high-end component as CPU or microcontroller?
The fundamental reason is foundries work really hard to make sure they have zero idle time, by booking time months in advance, so there wasn't a lot of slack in the system to absorb the extra demand when it hit.
Add some confounding factors like, it takes a long time to build a foundry, in general the CAD is specific to a foundry, not every foundry can make every part, and even if they could, they're not licensed to then: You get a global chip shortage that takes many months to unravel.
As I understand it, there are lines with spare capacity, but the work to move manufactures takes time. Even for the same process/wafer size.
So it's not just a capacity shortage per se. Rather, a situation where real demand was wildly different (higher, and lower) than predicted demand, and re-spreading work is hard.
Others have talked about it mainly affecting high-end silicon rather than all components but I assume that most equipment now needs at least 1 high-end component as CPU or microcontroller?