The Global Chip Shortage | Detailed Explanation

The ongoing chip shortage has reverberated through practically every industry, causing havoc in global supply networks. From automobiles to gaming consoles, power supplies to graphics processing units, only a few have been left unaffected.

Let us first understand what is the chip crisis, what is causing it, and how we can handle it.

What Is This Chip Shortage I Keep Hearing About?

As the globe shut down due to the COVID-19 pandemic, many manufacturers shut down as well, leaving chip manufacturing supplies unavailable for months. The demand for consumer electronics shifted, causing ripples across the supply chain. As manufacturers tried to produce enough chips to match the rising levels of demand, orders began to pile up. A backlog began to form, and it continued to grow and expand.

The current demand for chips is so high that manufacturers are unable to meet it, implying that consumers may soon face higher costs for fewer goods.

What Kind of Computer Chips Are We Talking About Exactly?

Chips can be found in almost every electronic device you own, from your smartphone to your gaming console to your vehicle. Chips can even be found in unexpected items, such as your washing machine, electric toothbrush, and refrigerator. However, these small components that power so much of our lives are in critically short supply right now.

The chips, also known as semiconductors or microchips, are the brains of our modern devices. They’re small technological wonders that contain billions of transistors, however, the chip size varies. (Those transistors act like tiny small gates, enabling or preventing electrons from passing through.) Their construction entails a number of processes, days, and experts on hand.

These chips are the lifeblood of modern society, yet demand for them far outstripped supply even before the pandemic.

What Is Causing Chip Shortage?

Chip facilities began shutting down early last year as a result of the pandemic, notably in Asia, where the majority of the chips are created. They had a backlog of orders to fill by the time they reopened.

That wouldn’t have been so frightening if chipmakers hadn’t been hit by unexpected demand. For example, no one expected personal computer sales to increase in 2020 after nearly a decade of steady decrease. But that’s exactly what happened after government shutdowns drove millions of office workers to work from home, while students primarily attended classes from their homes.

The global chip shortage was also exacerbated by the US-China tech conflict. SMIC, one of Asia’s leading semiconductor chip makers, has been banned by the US Department of Commerce. The difficulty to find parts made in the United States to make tiny chips had serious consequences for the supply chain. Several businesses had foreseen such moves and had begun stockpiling chips as early as 2019.

Which Manufacturers Are Affected?

According to research conducted by Goldman Sachs, the chip crisis affects a staggering 169 industries, in some manner. Here we’re talking about industries that make steel products and electronics, as well as industries that manufacture air conditioning systems and commercial TVs used for digital signages. The chip shortage has impacted even soap production.

Automobile manufacturers such as Ford, Toyota, and Volkswagen have all temporarily shut down plants in recent months due to a lack of chips needed to manufacture their vehicles.

Sony hasn’t been able to produce as many PS5 game consoles as it had intended. Microsoft is reducing Xbox Series X output, and Samsung is considering postponing its Galaxy Note smartphone.

How XO Is Dealing With The Global Chip Shortage

As a managed IT services provider, we’ve witnessed how semiconductor chip shortages have impacted manufacturers and their customers across a wide range of industries. Hence, we’ve also devised effective techniques for organizations to obtain the technology they require to stay productive.

To guarantee that our clients are not affected by the chip shortage, we are planning ahead of time. And when you deal with a managed IT service provider (MSP) like XO, you know that when it comes to hardware procurement, we can be your best friend. Not only can an MSP stock, install, and repair your hardware, but we also have strong collaborations with trade distributors that allow us to purchase more hardware, faster, and order direct. Almost always, an MSP will be able to obtain your hardware faster than you can.

Plus, at XO, we are aware that “business as normal” in procuring tech systems may not return to normal for several quarters at least. So, we plan accordingly and keep you profitable at all times. Talk to our experts to know more.

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