Global Computer Chip Shortage: How it’ll Impact You

Over the last couple of months, businesses around the world have been forced to scale back production due to a global computer chip shortage that has been disrupting their supply chains.

Why is there a shortage?

Though many can’t seem to agree on exactly why there’s a shortage, it’s likely due to a combination of the pandemic, trade wars, and the severe snowstorm in Texas. This, alongside an unprecedented demand for computer chips in January ($40 billion in sales – a 13.2% increase from January 2020) have all lead to a bottleneck that has had a knock-on effect across several industries.

The start of the pandemic saw many semiconductor businesses having to close. Although production resumed fairly quickly, the delay left them playing catch up ever since. People staying at home caused a surge in demand for technology; new laptops, phone upgrades, and other office/personal tech were being swallowed up.

Because pretty much everything we use nowadays has these computer chips installed, it’s left suppliers struggling to keep up with this increased demand. It then started to snowball. Even tech giant, Apple, was forced to delay the launch of the iPhone 12 for 2 months last year due to the lack of this integral component.

Isn’t there a backup?

There is, but there’s not a lot. It’s basic business economics. Many manufacturers don’t want to stockpile their computer chips because doing so would increase their costs. They can normally order them on an as-needed basis, but the temporary shutdown of factories last March left everyone without their slow and steady stream of supplies.

Major manufacturers of semiconductors are now at full capacity trying to play catchup. Building new factories to assist with the increased demand isn’t a viable option because they can take years to develop and cost millions of dollars.

Which major companies are affected?

Surprisingly, car manufacturers are bearing the brunt of this shortage. This is because in the beginning of the pandemic when there was a huge increase in demand for consumer tech, suppliers switched to making more chips for phones and laptops as opposed to cars. It made sense really. With several countries locked down, people weren’t shopping around for new cars as there was nowhere to go.

However, now that car sales are back on track, all the major players are fighting for who’ll get the chips first.

Ford recently cut production signficantly at its plants in in Illinois, Ohio, Kentucky, Michigan, Missouri and Ontario, Canada because of the shortage. Volkswagen and Toyota were in a similar position with VW having to close down one of its biggest factories due to the shortage. The CEO said it’s resulted in them being unable to produce 100,000 cars which they won’t be able to make up this year.

How does this supply shortage affect me?

Well, apart from the lack of cars in production, the issue will have wider spread complications for the public. The shortage is resulting in higher demand from consumers, and with production limited and fear of losing profits, brands could raise their prices to try and reduce demand or even recoup some of their losses for the year.

So, if you’re in the market for some new tech gadgets or a new car, at the minimum you might end up with a delay, and at worse, you could end up paying more than the usual price. The issue isn’t likely to resolve itself soon, either. High-level execs expecting the shortage to last until the end of the year, if not 2022.