Computer Chip Shortage


The globe is experiencing a computer chip shortage that is affecting everything from cars to handheld electronic devices. Many of the top electronic and automotive brands you are probably familiar with are struggling to keep up with demand due to the lack of computer chips for their products. To find out where this shortage began, and what is preventing increased production, we have to go back to the beginning of the global pandemic.

There is no one reason for the shortage, but rather a perfect storm of events that have led to increased prices and in some cases “out of stock” messages. With many business across the globe opting for work from home (WFH) during the pandemic meant record demand for laptops. Not only were people working from home more, they were spending more time in their homes in general. This means the need for more at home entertainment, in the forms of gaming consoles and computers.

At the start of the pandemic automotive factories made the decision to cut back on their demand for processors fearing that they would experience falling sales and be left with an abundance of product they could not move. This move would turn out to be premature and the market would bounce back with customers wanting the newest cutting edge technology. This meant the automotive industry needed to increase their demand for processors, but by that point the chip manufactures had given their product to other markets who were seeing their own increase in demand. This led to two markets with increased demand, but a maxed out production capacity.

There are other factors that have been responsible for the shortage as well. In February, power outages in Texas caused manufacturing facilities to be closed until mid-march due to the cold weather. Taiwan, another huge chip manufacturer, has also experienced a severe drought which has threatened production of many major plants in the country.

With increased demand in virtually every market, the cold hard truth is that there are only so many chips to go around. Most companies you associate with these chips such as Microsoft, Sony, Nvidia, AMD and Apple do not produce their own processors meaning their products are then slowed due to the manufactures being behind.

The gaming industry has noticed the processor shortage probably more than most. With the release of the latest Playstation and Xbox consoles many customers were left empty handed due to limited production, tracing back to the limited supply of chips required by the consoles. The PC sphere has probably been hit the hardest by the shortage, the latest graphic cards and CPUs are almost unobtainable through traditional retailers and resellers charging three or four times the MSRP.

Smartphones seemed like they would dodge the shortage and faired quite well in 2020. In 2021 however the shortage is still ongoing and they are not going to be able to maintain production without an increase in supply. Apple’s CEO Tim Cook recently told analysts that “We expect to be supply gated.” He would also go on to say that the shortage will affect iPad and Mac computers more than smartphones.

With new products being hard to obtain this has led to an increase in the used marketplace for electronic devices. Analysts are unsure when the chip shortage will be rectified, but many are saying that they expect it to last until at least 2021.

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