WHY THE CHIPS ARE DOWN FOR EVERYTHING FROM CARS TO PCs

Published: 10 August 2021

Have you recently struggled to purchase items such as computers, gaming consoles, printers and even cars?

If so, you are not alone – millions of people are victims of the great microchip shortage that has caused chaos for consumers and industries across the globe. We explain what the shortage is and how it came about, as well as what you can do to mitigate against supply issues.

The microchip basics

Microchips are integrated circuits that are literally made from grains of sand, which undergo an intensive manufacturing method in processing plants called ‘fabs’. The finished result are microchips, which are used to power everything from computers, smartphones and electronic games, through to microwave ovens and cars.

The process of creating chips is incredibly labour intensive – it can take three to four months to create a useable batch of chips – and ‘fabs’ are one of the world’s most complex manufacturing facilities, costing billions of dollars to build.

The problem

Due to the complex and expensive way chips are produced, the industry operates on a basis of under or over supply, depending on demand. When the pandemic started in 2020, car sales fell and much of the automotive industry – which is one of the largest users of chips, with modern cars containing in excess of 3,000 – closed down. As a result, many of the ‘fabs’ closed.

Yet at the same time, the world was told to stay at home and moved to remote working, home schooling, online socialising and exercising. This created a mass demand for items such as computers, iPads and videos games, which used up all the surplus chips no longer being used by the car industry.

Therefore, when the car industry re-started production it was unable to get chips, as they were all being used by electronics companies who had seen a mass surge in demand during the pandemic. The result is a shortage of new cars, along with computers and other electronic items. Prices are also increasing, with HP raising its PC prices by 8% and printers by 20% since the start of 2020. The knock-on effect is that the cost of TVs, smartphones and white goods are also likely to increase.

What’s the solution?

Unfortunately, supply problems due to chip shortages are likely to continue into 2022, due to the time-intensive process of producing chips. So, if you are planning a new car or electric gadget:

  • Start the ball rolling now – the lead time will be far longer than you anticipate, so it’s best not to delay if you need to replace a car or electronic item.
  • If feasible, rather than replace an item or gadget, try and stick with the existing one you have if it’s still functional. Not only will you avoid delays and potential extra costs, but it is also better for the environment.
  • Be patient – there are millions of consumers and businesses all over the world experiencing the same problem.
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