Everything to Know About the Global Chip Shortage Causing Delays in Laptop, Headphone, and Game Console Production

Author: Gina Cunsolo

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If a product you’re seeking to buy contains a computer chip, chances are the product is in short supply and may not be available at all. Chip shortage is a new reality. 

One of the standard features of items ranging from automobiles and washing machines to consumer electronics such as smartphones, gaming consoles, and laptops is that they all depend on computer chips to function. And one of the lingering aftereffects of the COVID-19 pandemic is a global chip shortage, and it’s not likely to end anytime soon.

Carmakers, for example, are reportedly filling parking lots near manufacturing facilities with almost-completed automobiles and pickup trucks, awaiting the installation of computer chips before the vehicles can be shipped to dealerships. That’s prompted the prices of new and used cars to skyrocket as the economy reopens and buyers seek to upgrade.

Makers of audio equipment, computers, and entertainment products are experiencing similar issues, with many warning bottlenecks in the supply chain are likely to persist for a year or more.

The issue isn’t confined to the United States, either. An analysis by investment bank Goldman Sachs estimates 169 countries worldwide are feeling the economic impact of the shortage. Considering there are currently 194 countries universally recognized, that’s a pretty significant chunk.

There are two questions on the mind of consumers: Why is there a chip shortage, and when will the chip shortage end?

Who’s to blame for the chip shortage?

Computers, also referred to as semiconductor chips or microchips, are complex components that serve as the brains of modern electronics. Along with all sorts of computing tasks, they perform functions in all kinds of devices, ranging from controlling the temperature of a refrigerator to managing the fuel mixture in a car’s engine.

Although the United States leads the world in chip design, it accounts for just 12% of chip manufacturing, according to Boston Consulting Group, down from 37% in 1990. East Asian countries, including China, Taiwan, and South Korea, have picked up the slack and are now responsible for more than 75% of chip supply.

Factory shutdowns in those countries as a result of the pandemic are responsible for much of the shortage. Today, most companies operate under a “just-in-time” inventory model, meaning they don’t keep a supply of extra chips in the warehouse and only order them as needed. Many chip manufacturers scaled back production during the height of the pandemic as demand fell and are struggling to ramp back up to capacity in the wake of an economy that’s rebounding stronger than expected. Contributing to the shortage is that as technology advances, more and more new products are dependent on those chips to function, further fueling the increase in demand. Trade friction between the United States and China is a factor as well.

How long will this go on?

Estimates on how long it will take for the chip supply to recover entirely vary.  Research firm Gartner, Inc. predicts the supply will return to normal levels by the second quarter of 2022. Others indicate the issue could linger into 2024.

In response to the shortages, some U.S. Congress are seeking to provide funding to expand domestic chip production, although experts say it could be years before new production would come online. Others say the global chipmaking industry is too intertwined for one nation to become completely self-reliant.

Unfortunately, the only option consumers seem to have is to wait for the shortage to be resolved. The best advice one could offer would be that if you see the product you want on the store shelf, grab it while you can. It may not be available tomorrow or for the next several months.

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