We were no strangers to production shortages in 2020. From toilet paper to groceries, Covid-19 has changed both the consumer and production landscapes. While most of us can relate to the shortages of these everyday items, there’s one industry that has been suffering just out of view for months. The tech world has been rocked at all levels of the supply chain due to a shortage in silicon chips. Multiple industries, such as gaming, automotives, and computer parts manufacturers, have been brought to a halt. While the rest of the world looks towards getting back to normal with the vaccine, these industries are playing things safe while they wait to see what the second half of 2021 brings.
What is a silicon chip anyway?
Just about every piece of technology we use today, from cell phones to our cars, use a silicon chip of some variation in their processors. These chips are made into central processing units (CPU’s), graphics processing units (GPU’s), random access memory (RAM), and other types of computer hardware used in our everyday devices. They are the brains and muscles of our tech and it is important for brands like Intel and Apple to have the highest quality chipsets to keep up with demand.
Where does it come from?
The rate that our technology has been advancing requires the most advanced fabrication technologies available to keep up with production and innovation. Of these sites able to meet those production standards, 88% are located outside the United States. Even the production that does take place in the U.S. isn’t up to par with outsourced fabrication sites. The largest of these production companies is TSMC, based out of Taiwan. Not only has Covid-19 been an issue but Taiwan has been facing one of the worst droughts in the last half century. This has created a huge bottle-neck for major U.S. tech companies like Apple, Intel, AMD, Nvidia, and more as they all need these chips.
Working from home and an increase in demand
On top of all these production issues, demand for consumer tech spiked last year when the majority of people began working from home. Consumer tech sales saw a 17% increase in 2020 and is expected to continue at least until the end of Q1 2021. The need for webcams, computers, and other devices have become more important than ever with schools and workplaces going remote. Entirely new demographics are engaging with consumer tech either out of necessity or just to stay connected which caused a lot of strain on supply even before the production issues. Compounding all of these has created a recipe for disaster for both producers and consumers.
A huge leap forward that no one can afford
At the end of last year we saw massive leaps in the tech space with launches like the Playstation 5 and Xbox Series X, Apple’s new line of products featuring their M1 processors, the Nvidia RTX 3000 series GPU’s, and AMD’s Ryzen 5000 series CPU’s. Not only did all of these products provide jumps in performance and the start of the next gen of tech, but they were also sold out almost immediately and scalped online for double, or even triple in some cases, the retail price. Whether for work or recreation, people are spending more time at home and are looking to upgrade their spaces. The scalping issue has created a huge headache for potential consumers and retailers alike.
What should you do if you’re looking for these products?
If you’re looking to get your hands on some of these new devices, the best recommendation is to just be patient. It’s expected that in the second half of 2021 the market will start stabilizing. These shortages have gotten national attention, and President Biden signed an executive order to address the issues and review the supply chain. Silicon chips take roughly three months for production so it’s still unsure if we’ll see an upswing in the second half of the year.
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