How the Semiconductor Shortage is Influencing Supply Chains Worldwide

You may have noticed the recent price increase for consumer and business electronics, and it’s all caused by issues related to the global shortage of computer chips. How have these supply chains, stable for so long, been dealt such a severe blow to the point where acquiring new computers and networking equipment is so challenging? Read on to find out.

The Law of Supply and Demand

In 2020, as COVID-19 forced the majority of businesses and organizations to shift to remote operations, the global demand for new computers skyrocketed. 2021 has not been much better. While this looks like a great benefit for the semiconductor industry at first glance, that is only half of the equation. The industry may have seen its sales expand to nearly half a trillion dollars over the past year, but at what cost?

When the supply chain cannot keep up with demand, it is natural that the supply will eventually run dry. When you compare this immense demand to the PC market in previous years, you might start to see why such a shortage exists. The stagnation in the PC market coupled with the increase in demand for these devices, as well as other electronics and the greater need for cloud computing, led many industry professionals to forecast increases of another 12 percent in 2021 to $511 billion.

As a result of this massive bump in demand, the industry simply was not prepared for the influx of sales and, thus, could not keep up with it. The shortage itself began in the second quarter of 2020, and its effects have been felt by manufacturers, retailers, and businesses alike.

The Greater Ramifications

The semiconductor shortage doesn’t only impact computers and smartphones; it is causing ripples all over for any devices that require them. One notable example is the automotive industry, which has experienced several halts in production due to the chip shortage.

On a greater scale, the electronics industry has had to make several hard choices related to hardware simply because the pieces required to make their devices are not available in the needed quantities. As you might imagine, this shortage has a considerably larger impact on smaller organizations, as large-scale manufacturers have the advantage of more capital to invest in buying up the remaining stock.

How This Affects Your Business

It might not be clear how this shortage will affect your business, but what is clear is that people with an understanding of this industry are not holding their breath expecting the issue to resolve itself. Businesses in particular will need to keep their eyes on the market for any signs of recovery, as the need for new hardware and increased data processing capacity will drive the demand for semiconductors until the shortage recedes.

It’s likely that businesses will see increased prices for the foreseeable future--at least for the next four-to-six fiscal quarters, or until the supply chain is able to recover and fulfill demand. SCW will keep an eye on this situation so we can best serve our clients. After all, we want to help you get the best resources at a reasonable price. If you have any questions or concerns about this semiconductor shortage, SCW is happy to help. To learn more about how we can help you navigate this situation, reach out to us at (509) 534-1530.