The global chip shortage is starting to have major ramifications in our daily lives. So what is the chip crisis that has affected the whole world, and when is it expected to end? We have answered many questions about the chip crisis for you.
Today, almost every electronic device contains silicon, also called microchips; powered by semiconductors used to build integrated circuits. This technology is used for cars, digital screens, entertainment systems, parking sensors, even electric toothbrushes. However, these days when the demand for these small parts that power a large part of our lives is much higher than the supply, a global problem has started to arise in the supply of chips.
What is the Global Chip Crisis?
Previously, computers were made of tubes and dials that were not only fragile but required a lot of electricity. But then they were replaced by faster, cheaper, and more efficient semiconductor chips. These chips are making significant advances in computing, communications and applications that are now used by nearly every industry. In other words, everything needed to calculate or process information is present in a chip and precisely for this reason it plays an extremely important role in our lives.
While millions of products today (cars, smartphones, and more) rely on computer chips, also known as semiconductors, there are currently not enough chips to meet industry demand. This supply-demand imbalance, which started in the first quarter of 2021, is called the chip crisis on the global axis.
Why Did the Global Chip Crisis Occur?
Pandemic conditions mainly lie behind the chips’ turning into a crisis element. The rise in remote work has led to increased demand for computers, network peripherals, and other consumer electronics with chips. However, existing stocks were also depleted as chip production facilities were closed due to quarantines.
Chip Shortage in Vehicle Production
The automotive industry, which needs chips for everything from the computer management of engines to driver assistance systems, is taking the biggest hit in the global chip crisis. So much so that brands such as Ford, Volkswagen, Jaguar, Land Rover, which are considered the giants of the automotive industry; it had to close its factories, lay off its workers and reduce vehicle production. Some automakers gave up high-end features due to the lack of chips installed in cars. For example, Renault has announced that it will no longer use a digital display in some of its models.
Delivery times were quite delayed. Automakers are forced to stop production or ship unfinished products. As the vehicle supply decreases and consumer demand increases, a price inflation occurs that affects millions of consumers.
According to a recent report from Bloomberg, the automotive chip crisis is starting to affect rental car companies as well. It is said that Hertz and Enterprise, one of the famous car rental brands that buy and rent new vehicles in bulk, now resort to buying used cars by auction.
What are the Effects of the Chip Crisis on Our Daily Lives?
The chip crisis, which first hit the automotive industry during the COVID-19 pandemic, continues to cause global disruptions with a gradual impact. Despite the shortage of chips in vehicle manufacturing, chip manufacturers have had to shift their focus to other areas, such as computer equipment and mobile devices. Because with more people working remotely, 5G and cloud-based services have grown, communication platforms like Zoom have become an integral part of our workflow. All these developments further increased the already unmet demand for chips.
Research on the subject today shows that approximately 169 industries are affected by the global chip shortage. Global phone shipments, for example, dropped significantly. Production of low-margin processors, such as those used in washing machines or small appliances, is also taking a hit. While most retailers and therefore consumers are still able to access these products at the moment, there is a high probability that they will encounter supply problems in the coming months.
How Long Will the Chip Shortage Last?
The growing chip shortage makes it clear that global supply chains are under pressure on many fronts. In this new environment created by the changing consumer behavior with the pandemic, it seems that the semiconductor and component shortages will get worse before they start to improve due to our new generation chip-dependent technologies.
Many brands have already begun to withdraw their forward production and profit targets. This situation is expected to be reflected in the sales prices of other technological devices, especially automobiles. For now, consumers and businesses have only one choice. Keeping existing devices, cars and other equipment in the best possible way and not upgrading until the crisis passes.
