In the digital age, semiconductor chips have made their way into a host of everyday items. In the 21st century, even our refrigerators have a “brain.” Over the last year, COVID-19 has highlighted frangibility in the interwoven global supply chains and myriad chip-centric industries, with backlogged inventories and empty store shelves lying in its wake. While the automotive slowdowns and limited laptop supplies have made plenty of headlines in the last year, the silicon scarcity continues to shed light on the increasingly critical role computing power plays in daily life.
We spoke with industry analysts and executives to learn more about the lesser-known product disruptions, how long shortages could last and how different sectors are weathering the silicon storm.
“The semiconductor shortage will impact almost everything with a plug or a battery,” said Glenn O’Donnell, vice president, research director at Forrester. “We hear a lot about serious issues with automobiles and PCs, but consumer electronics, home appliances, medical devices, and even toys are suffering from chip availability.”
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Based on client inquiries, Gaurav Gupta, vice president analyst at Gartner, detailed some of these production disruptions including banking card chip shortages and the availability of tablets diners use for payments at restaurants. A dearth of semiconductor chips has limited the availability of popular video game consoles with ramifications for gamers and developers alike.
In the home appliance industry, O’Donnell made note of smart refrigerator product delays and explained that smaller quantity products are “suffering more” comparatively. Self-described as a “ham radio nut,” O’Donnell discussed one of his hobbies to explain how the sway of tech titans could impact smaller companies as industries compete for limited resources.
“In this hobby, the newer radio “toys” are advanced technology, but the hottest radio might sell 5,000 units per year. If Apple wants 100 million chips, but the little ham radio company wants 5,000, Apple wins!” O’Donnell said.
Sage Chandler, vice president for international trade, and Prabhat Agarwal, senior director for research at the Consumer Technology Association, stated similar sentiments.
“In terms of company size, the largest organizations are seeing the smallest impact while small businesses are being hit the hardest,” they said.
In recent months, there have been plenty of discussions about the economy “running hot” with rising inflation. Earlier this month, the Bureau of Labor Statistics released its April Consumer Price Index. In the last year, the index rose 4.2% (not accounting for seasonal adjustments), representing the “largest 12-month increase since a 4.9-percent increase” since 2008, per the index.
While O’Donnell believes the “chip crisis will get worse before it gets better,” he explained that inflation “could put a damper on demand, which would alleviate much of the shortage problem.”
“I fear inflation is running amok right now, but it will come under control in the next few months. Demand remains strong and will weather a short-term inflationary burst,” O’Donnell said.
Cross-industry chip competition
In the interim, companies are left to vie for a slice of the silicon pie, leading to cross-industry competition for chips. For example, as our sister site ZDNet previously reported, NVIDIA designed a dedicated chip for crypto mining to serve as a detriment to miners buying up its gaming GPUs.
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The automotive industry has made plenty of headlines as shortages lead to production bottlenecks. Earlier this year, Ford announced that it was decreasing F-150 production due to chip constraints. O’Donnell explained that the headline-catching shortages may also impact production at a cost to other markets.
“The automotive industry is getting intense media attention right now, so chipmakers will step up to fix that backlog soon. That will come at the expense of other products, though,” he said. “If Ford, Honda, and Daimler are getting chips, someone else is not. That will exacerbate other shortages that will be just as big, but perhaps less visible.”
These chip-related market disruptions have hamstrung myriad industries for months and shortages could continue well into the holiday shopping season later this year. O’Donnell said chip-related disruptions in the toy industry could end up being “THE” one “big news story of the holidays,” adding emphasis over email.
“Never mind big business suffering; if you can’t get that cool new toy for your kid, chaos will ensue!” he said.