What’s driving the global technology shortage?

In recent months we have seen yet another price rise in the technology industry, with another rumoured for August 2021. Computer equipment is getting more and more expensive and harder to get hold of, but why???

A lot of people are putting it down to a combination of Brexit, Covid and the Suez Canal incident, All of these issues have had an effect but the reality is that it is mostly down to a shortage of semiconductor chips.

Semiconductor chips are the brains behind the vast majority of technology, from toothbrushes and TVs to Cars and Computers, its surprising the number of devices that are reliant on these little chips.

The availability of technology has been in decline since the start of the Covid pandemic, with global stocks of most devices being snapped up people transitioning to working full time at home.

Sadly, Covid is not the only reason for the shortage, coupled with several “natural and man-made disasters” such as the trade war between China and the USA, the blockage of the Suez Canal, a factory blaze in Japan and a water supply shortage in Taiwan, semiconductor production has taken a major hit while global demand has continued to rise.

Several major manufacturers have released statements in recent months about the future of their products:

“Due to the global semiconductor shortage, we are also experiencing some effects especially around certain set products and display production,” said Ben Suh, head of Samsung’s investor relations, on a call with analysts.

“We are discussing with retailers and major channels about supply plans so that we are able to allocate the components to the products that have more urgency or higher priority in terms of supply.”

Samsung’s co-chief executive and mobile chief, Koh Dong-jin, said at a shareholder meeting in March that there’s a serious imbalance in supply and demand of chips in the IT sector. At the time, the company said it might skip the launch of the next Galaxy Note smartphone.

LG said it is “closely monitoring the situation as no manufacturer can be free of the problem if it gets prolonged,” according to The Financial Times.

So how long is the shortage likely to last?

While Covid did put a huge strain on the manufacturing industry, most semiconductor manufacturers are now at 100% capacity, so everything should return to normal pretty soon, right?

Sadly, the forecasts for the shortage don’t end any time soon, with most predictions hitting 2023 before any real change. The major problem comes when you realise that it's not just semiconductor manufacturers that are affecting the recovery. With the sharp rise in demand in 2020, the whole supply chain for technology components is running at 100%. To produce more semiconductor chips the major manufacturers are looking to make huge investments into new facilities, but these can take up to 2 years to build and set up the incredibly sensitive equipment, these new facilities can cost Billions to set up, so it's no wonder the prices have had to rise.

The following video from the Wall Street Journal is a great insight into semiconductor manufacturing and why we are facing such great shortages:

Rest assured that here at The Ideas Cupboard we are doing all we can to source equipment for our customers as well as repairing older equipment to keep your business running.

If you have any questions please do not hesitate to get in touch.

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