As the global shortage of computer chips persists, plan accordingly

Monday October 18 2021
Computer pic

Chips are at the heart of most electronic devices and appliances in cars, computers, toasters, washing machines, phones, toys, and millions of other goods. PHOTO | FILE

By Sam Wambugu

An unprecedented shortage of computer chips continues to bite the auto and smart devices industry, causing them to rethink their future. The world now stares at surging prices of chips-laden goods, if at all available.

Chips are tiny technological wonders hosting billions of transistors within them. They are at the heart of most electronic devices and appliances in cars, computers, toasters, washing machines, phones, toys, and millions of other goods.

Nearly all new digital appliances and devices require chips to operate, creating a red-hot demand that manufacturers can’t match. Trends for more digitisation pushed by Covid-19, the expanding fifth-generation (5G) cellular technology market, and the need for advanced chips for the latest appliances continue to drive up the demand.

As most people retreated to homes and turned to digital devices for businesses and entertainment, the demand for computers, smartphones, games consoles, and television sets swelled, packing pressure on a suppressed supply chain.

The pandemic exacerbated the problem as many manufacturers, the bulk of them in China, Taiwan, Korea, and the United States, either closed or cut down their production.

The shortage has caused massive losses to companies reliant on chips to manufacture products, all this happening when the demand for smart gadgets is at record highs.

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Car companies, including Ford, Volkswagen, and Jaguar Land Rover, have shut down factories in some countries, laid off workers, and slashed vehicle production.


Billionaire businesses

Nissan and General Motors have had to interrupt their production. They have parked thousands of vehicles waiting for the chips. Toyota’s outlook isn’t optimistic either.

Apple CEO Tim Cook has sounded the alarm, warning the public that the chips famine will upset its supply of MacBook laptops, Beats earphones, iPhones, and Apple Watches.

Additional chips-producing plants would alleviate the current scarcity but building a semiconductor factory costs billions of dollars and is time-consuming, leaving just a handful of billionaire businesses to invest in the industry. The issue is further afflicted by the increased demand for new-generation chips. The new chips can’t be made using the older production lines — and it is expensive and time-consuming to retrofit the antiquated production lines to make the modern chips.

Although it is difficult to ascertain the full extent of the semiconductor supply challenges and the likely hoarding of chips by some customers, there is a general agreement that the shortage will persist at least until mid-next year.

For countries like Kenya, where the shilling has shrunk against the dollar, the fuel prices have peaked, and the global price of chip-laden products has skyrocketed, consumers should plan to dig deeper into their pockets or altogether wait for prices to drop in about a year.

For the importers of affected goods, it will take much longer to meet the demands of your clients, and the prices may be unpredictable until supply bottlenecks are removed. Therefore, plan accordingly.