How is the global chip shortage affecting our lives?
Did you know we’re going through a global chip shortage right now? If you saw how expensive gadgets are right now, then you’ve seen one of its widespread effects. We will all feel its impact ripple throughout several years.
We will need a quick rundown of semiconductor chips, so everyone’s up to speed. Then, we’ll talk about the several factors that brought the global chip shortage. More importantly, we’ll talk more about how it will increase prices for numerous products.
When the price of one thing goes up, others may follow suit. For example, products with computer chips will become more expensive if chip prices go up. If you understand such connections, you can adapt to ever-changing market conditions.
What’s a semiconductor chip?
We have to talk about one thing before discussing the global chip shortage: the “chip”! Just to be clear, we’re not referring to snacks! Rather, we’re talking about semiconductor chips.
If you’ve ever seen a computer ad, it may have focused on a tiny metal square. You’ll see the semiconductor chip inside. That serves as the computer’s “brain.”
It paved the way for portable gadgets such as game consoles and smartphones. Chips are one of the reasons we get smaller and thinner iPhones!
Nowadays, it’s in products you wouldn’t expect. For example, many pickup trucks now have computer chips. It enables several features like power steering.
You even have chips in household appliances like washing machines. If yours has special settings for different types of laundry, thank computer chips!
As you can see, it’s an important component for numerous products. That’s why the ongoing global chip shortage is a serious worldwide issue. But how did it start?
How did we get a global chip shortage?
The COVID-19 pandemic is one of the major factors behind this supply problem. Countries enforced lockdowns to fight the spread. This came at the expense of businesses.
Many had to close down because they couldn’t operate remotely. Others had cut down costs. As a result, millions around the world lost their jobs.
This meant people had less spending power. In turn, they’re unlikely to buy expensive items such as cars. That’s why the automotive industry expected lower demand.
Car companies like General Motors shut production lines. They expected the downturn to last months. This is why they also canceled chip orders.
In response, chip manufacturers such as Taiwan Semiconductor Manufacturing Corp. (TSMC) reassigned their production. It made chips for gadgets instead of automobiles.
Car sales picked up, though. Unfortunately, chip manufacturing plants couldn’t go back to supplying vehicle companies fast enough.
In turn, car supplies couldn’t keep up with the high demand. Following the law of supply and demand, they are resulting in higher car prices.
What are the other factors to the chip shortage?
Great to be on the new @CNBCTechCheck with @jonfortt to discuss investing in semiconductor manufacturing and Intel @mobileye momentum! https://t.co/CXcNbBvtC9
— Pat Gelsinger (@PGelsinger) April 12, 2021
- Factory fires – Many chip manufacturing plants caught fire several months ago. These include two factories in Bao’an and Xinjiang, China. Another one in Tokyo, Japan, burned down as well.
- High consumer demand – The pandemic caused a remote work trend around the world. More people needed computers and smartphones so they could work at home. The semiconductor industry couldn’t keep up, though. As a result, the world quickly ran out of products that contained chips.
How will a global chip shortage affect products?
When there is less supply, demand rises. In turn, prices go up too. This is a simple way to tell the law of supply and demand. It also explains the effects of the global chip shortage.
Nowadays, numerous products use semiconductor chips. If we run out of those, factories will have a hard time producing goods. As a result, we see prices for so many things skyrocket!
For example, it’s the reason why computers are pricier nowadays. Even Apple CEO Tim Cook admitted his company would have trouble producing the next iPad model.
This is also the reason why cars are more expensive. It’s especially true for EV brands like Tesla and NIO. We even had to discourage investors from getting NIO stock because of this!
It is such a serious issue that two great countries are responding immediately. For example, China offered plenty of subsidies to help its chip industry reduce its dependence on the West.
Meanwhile, US President Biden plans to spend $37 billion to boost the country’s chip production. Vice President Harris also spoke with Singapore regarding the issue.
Intel CEO Pat Gelsinger also warned that this crisis might get worse soon. He said it would take “a year or two” before chip supply chains go back to normal.
How do I respond to the global chip shortage?
Now that you know about this ongoing issue, you should now learn how to adapt to it. We will show you how you can survive and even thrive during this crisis:
- Take care of your devices – Always clean your phone and your computer. Make sure to turn them off when not in use. Learn and use other ways to maintain gadgets. This way, you won’t have to buy a new one for a long time.
- Buy refurbished goods – Stores like Apple lets you purchase second-hand devices. This is your chance to buy one such as the iPhone XS at a low price! You don’t need the latest models after all. It’s even better if you don’t have an Apple phone yet.
- Invest! – Some assets are sources of passive income. They can help you save enough for a new device while doing nothing! However, make sure you study an asset before you invest. Start by reading more investment articles from Inquirer USA!
Final thoughts
Now you know about the ongoing global chip shortage. We even showed how you could adapt to it. The only thing left to do is learn more about such issues.
You can find more information on the internet. These include articles and videos. See what experts think of the market data. This way, you’ll see the issues from multiple points of view.
We don’t know when the crisis will end. But we do know when you should start adapting: now! Act now so you can survive and even thrive during these economic downturns.
Learn more about the global chip shortage
Is there a global chip shortage?
Yes, the world does not have enough semiconductor chips to meet the current demand. Factories are having a hard time producing them. Because of less supply and greater demand, the prices of numerous products go up by quite a lot. This includes cars, smartphones, game consoles, and even home appliances.
How long will the car chip shortage last?
Some experts say this lack of supply will last for two years or even more. This is because chip supply chains rely on numerous countries working with each other. Worse, the COVID-19 pandemic is making it harder to transport these products. The public health crisis keeps people from replenishing their purchasing power.
Who is the largest chip manufacturer?
Intel remains the biggest chip-making company in the world. You might know it as a brand of computers, but it produces more than just those. It creates several of the components for other devices too. However, even its CEO Pat Gelsinger admits his company will have to deal with the global chip shortage for at least two years.
Disclaimer: This article is the author’s personal opinion, which may differ from the “official” statements or facts.
