Chip shortage: Should you buy tech now or wait out the silicon storm?

We spoke with tech pros to understand which products consumers should buy now, purchases to put on hold and when supplies could normalize, but don't expect a turnaround anytime soon.

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Image: GettyImages/gremlin

The coronavirus pandemic has sent shockwaves through supply chains leaving shortages, product delays and empty store shelves in its wake. The widespread runs on semiconductors have been acutely felt as these chips are critical to far more than computers in the digital age; logjamming production of everything from laptops to gaming consoles and automobiles. But, within this overall shortage, could there be an economic opportunity for consumers willing to wait a bit to purchase specific products down the road?

We spoke with tech pros about chip supplies and product bottlenecks to help people navigate this silicon shortage in the months, and potentially years, ahead.

"It's hard to say 'wait to buy' for anything because just about anything will be impacted," said Glenn O'Donnell, vice president, research director at Forrester.

But there is a caveat: O'Donnell said people should wait to buy if, with an emphasis on "if," these people are "willing to wait an extended time" for the desired product. Although this waiting game may be particularly painful for consumers accustomed to the Amazon Prime era; as O'Donnell said many people are "impulse buyers who have now come to expect instant gratification." Wait times could be upwards of "several months" and these timelines will "likely get worse," so those who wait will be waiting even longer, he said.

Due to these aforementioned constraints, O'Donnell explained the situation "leaves a few unsavory options," including paying a premium for productions, using production substitutions as well as a third option: "Give up hope for now."

"If you can even get it at a premium, this is the least of all evils," he said. "You get what you want even if you grumble about the price."

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Feast or famine: Purchasing power and improvisation

Purchasing power often gives priority to larger companies with lengthy order sheets seeking bulk buys and this dynamic is playing out during the chip shortage. O'Donnell said, "the general rule is big chip customers get preference over smaller manufacturers," as for specific chip market players, he said "if Apple wants 100 million chips but XYZ wants 5,000, Apple gets priority."

These product delays can vary across industries depending on the product, O'Donnell explained, while making note of "worse shortage" with less advanced tech. Without purchasing power, smaller manufacturers may be faced with few desirable options to keep inventory flowing.

For example, O'Donnell said there's a limited supply of the small IoT device 8-bit microcontrollers, and while he said there are "zillions of variations in these microcontrollers" allowing companies to find similar alternatives, these moves would require a redesign for the product to accommodate said alternative microcontroller.

"As painful as that is, some small manufacturers have no choice," he said.

In some instances, companies are unable to fully assemble products due to the shortage. For example, Ford has stored surplus vehicle inventory at a raceway in the Bluegrass State, per WHAS reporting. As chip manufacturers ratchet up supply, what impact could these deliveries and product completion months later have on supply chains?

While O'Donnell doesn't see "a glut of any particular" semiconductor chips even when "capacity catches up to demand," he said the noteworthy "glut to watch is the uncorked supply of the products that depend on these chips" and is "particularly curious about how this will play out in the automotive market."

"Thousands of 2021 vehicles are sitting idle awaiting chips," O'Donnell said. "The 2022 models should now be arriving. Will the 2021 models now be rebranded as 2022 models? I am trying to find the answer to that question, but the car companies are largely mum on that subject."

There are a few buying strategies and trade-offs people can consider to more aptly traverse this vast desert of semiconductor chips. For one, O'Donnell said people can choose a "dumb" appliance instead of a smart option.

"A dumb refrigerator is likely available whereas the smart version is not. The dumb one will also be cheaper," he said. "Other product categories like toys and cars are in a similar situation."

Interestingly, some people are choosing more readily available "less advanced products," according to O'Donnell, but he doesn't view this as a "groundswell" moment by any means, adding that these consumers "see a bit of a nostalgic 'retro' appeal to these products," some of which are refurbished.

Similarly, as we previously reported, the global chip shortage could spur a retro gaming renaissance of sorts, as consumers seek throwback gaming systems amid new console shortages and restock issues. For example, in May, sales for Xbox One consoles increased 103%, PS3s jumped 38%, PS4 accessories and console sales rose 32% and surged 160% from May 16 to 22, according to Decluttr data.

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Image: GettyImages/Jorg Greuel

Chip shortage: Tech pros talk timelines

More than one year into the chip crisis, the shortage continues to reverberate across industries as bottlenecks impact product rollouts months after a product launched. Take the PS5, for example, which is still marred with delays nearly one year after the initial rollout. So when can people expect the chip shortage to be corrected or have less of a marked impact across industries?

While O'Donnell said Forrester does not anticipate "noteworthy relief until well into 2023," he made note of activity by chip manufacturers to build new factories, predominantly in Europe and the U.S., to "geographically diversify the supply." Even though construction on these facilities started in the spring, it will take a minimum of two years to build these factories and subsequently "several months" before the first chips are ready, according to O'Donnell.

"Because of this lag time, supply is stuck at a limit, while demand continues to surge," he said.

Others we spoke with forecasted similarly lengthy timelines for any normalization of the overall semiconductor chip markets. Gaurav Gupta, vice president analyst at Gartner, expects a chip shortage correction at some point between the second quarter and third quarter of next year for a few reasons. First, he said supplies from foundries with announced expansions will begin to come online in the first quarter of next year. Additionally, he said there's been some "demand softening in certain sectors" and higher foundry wafer pricing will inhibit double and triple customer orders and/or instances of "irrational inventory build-up."

Despite this comparatively optimistic timeline, Gupta said the "situation is still volatile," making note of delays and shortages due to resurgent COVID-19 cases in Malaysia and Vietnam; two countries he described as "critical suppliers" for chip test and packaging as well as "sources for passive components" such as resistors and capacitors in various electronic equipment.

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Discussing product companies that are unable to fully assemble due to the chip shortages, Gupta said this specific situation happened with PCs and laptop original equipment manufacturers. However, he expects an excess of memory toward the end of next year and, "from a logic perspective," anticipates "devices fabricated on mature nodes to be in excess" at some point later in 2023 or into early 2024.

One year ago, Jens Gamperl, CEO of Sourcengine, said he would've told people the rebound from these shortages would've started by the end of 2021 and early 2022, but, based on what the company is hearing from its suppliers, "the shortage isn't coming to an end anytime soon."

"Not only do I believe that we'll be dealing with some of the shortages until 2023, but I also think we'll see long-term changes to how electronic components are sourced," Gamperl said. "The devastating shortages have opened the eyes of many to the weaknesses of existing procurement and supply chain processes."

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