When in 2021, the chip shortage caused the shutdown of the automotive production line, the electronics industry saw itself next in line. Suddenly the small chip used in the smallest parts of the components used in different operations became a hot topic for discussion. When high-tech electronics companies such as Samsung and LG started experiencing the shortage, the importance of the chip intensified. From the automobile to consumer electronics, every other industry started feeling the impact of the shortage. This made it clear that we live in electronics!
But what led to the shortage of chips?
To understand the impact of the chip shortage on the electronics industry, it is equally important to understand what led to the same shortage. The onset of the epidemic, when lockdowns caused production to halt or cease entirely, is when the chip scarcity first started. Lockdowns and more time spent at home caused a rise in demand for consumer technology, further limiting the availability of semiconductor chips. In a nutshell, several external causes contributed to the global chip shortage in 2020–21. These include the COVID-19 outbreak, the speeding up of digitization, the escalating U.S.-China trade tensions, the Russia – Ukraine war, the conventional "just-in-time" component inventory strategy used by OEMs worldwide, and quickly shifting customer behavior. Additionally, even natural catastrophes like the 7.3-magnitude earthquake that struck Japan this year prompted chip manufacturers to close.
Understanding the impact on the electronics industry
From the moment we wake up, we are highly dependent on electronics for a living. Over the past few years, increased consumer electronics usage has boomed the global electronics industry. However, the shortages in chips created an adverse impact on the worldwide market. Over 160 industries are affected due to the chip shortage in the market. While applying the economic 'Demand-Supply' phenomenon in real life, the rising demand for chips has increased its price. An increase in the price of the chip has also increased the price of consumer electronics. Computers, computer accessories, and smart devices all had about a 3% increase in price from the previous year. The lack of chips is another factor driving up the cost of smartphones and other smart devices like the iPhone and iPad.
The scarcity has significantly impacted other electronic companies, including Samsung and LG. Due to the difficulty of sourcing processors, both firms' offerings of televisions, home appliances, smartphones, and other electronic goods have been subject to low availability, backorders, and increased costs. Beyond the typical holiday season boom, both Microsoft and Sony have had trouble keeping up with demand for their new systems and peripherals. Both businesses have said that the console and accessory supply problems should be rectified by 2023. Additionally, firms like Intel believe it might take years rather than months to effectively address the issue. In the interim, the shortage may result in poorer company profitability or higher consumer costs, which may prevent more people from affording the products.
Conclusion
Chip being the smallest part of the electronics, is the most significant one. According to experts, the chip shortage has shaken the electronics industry to some extent, and it might take 3 years or more to cover this deficit. Electronics producers facing the pile-up of orders, chip shortage will surely reflect in increasing price of the electronics products and lower profitability to producers.
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