2021 – WHY IS THERE A GLOBAL CHIP SHORTAGE?

The days where you popped into an electronic store and purchased a brand new or trending game console, a laptop or any other electrical device on demand are long gone. Other online tech giants such as Apple, Samsung & Sony are also struggling to deliver their products to your doorstep.

Customers are getting confused, why they can’t get the products they always got before within few days. The answer is that right now supply chains across all sectors are under extreme pressure and items that you used to be able to purchase and have delivered the next day are being quoted with extended lead-times!

The supply chain nightmare is jacking up prices for consumers and slowing the global economic recovery. This article will help you understand all the factors behind the global shortage that are causing extremely long lead times.

This is a global issue

The supply chain disruptions aren’t just affecting a number of big companies in the UK, it is a global issue affecting every company around the world.

Why is there a shortage?

The global shortage was prompted by the Covid-19 pandemic and the surge in demand for electronics. Consumers from around the world started purchasing new equipment for staff working remotely and children being home-schooled.

Other factors such as border controls and mobility restrictions, unavailability of a global vaccine pass, the instability in freight costs and raw material availability have combined for a perfect storm where global production was hampered because deliveries were not made in time, costs and prices surged and GDP growth worldwide was not as robust as a result.

How long will the shortage last?

The current supply chain issues are likely to outlive the pandemic and extend over the next few years.

With the demand for electronics likely to continue increasing as more companies undergo digital transformations, suppliers and governments are investing into more capacity for chip manufacturers.

There is a light at the end of the tunnel as the semiconductor supply is expected to rebound by the end of 2021. However, the global chip shortage is now set to last throughout the whole of 2022 as we are currently facing lead times of up to 52 weeks.

Our advice: What should you do?

  • Secure all orders for 2022 and beyond
  • Increase levels of stock both onsite and with suppliers
  • Commit to long-term orders – avoid forecasting
  • Regularly review demand

As we expect to see some stability in the next coming months, it is important to be prepared. Even when the current global chip shortage ends it is likely more supply problems are just around the corner as demand for electronics grows further.

The capacity expansions for chip manufacturers that are being put into place now will be enough to cover for the next few years. However, in years to come our world will continue to undergo its global digital transformation, we will be maxing out capacity again due to higher electronic equipment demand.