Qwick Takes: How bad can the chip shortage get?
This week, Talking Biz News Deputy Editor Erica Thompson reached out to Qwoted’s community of experts to inquire about the persistent semiconductor shortage that is forcing companies to curb production and disrupting already vulnerable supply chains.
Check out some of the top commentary:
The current chip shortage arose largely due to factors such as labor, pandemic disruptions, transportation assets and more. Part of the reason why the chip shortage is so damaging is due to its wide range of impact, having affected industries including food, construction, durable goods, automotive, and other chip-dependent products. If we do not see relief in the shortage soon, we could see significant negative impacts to the supply chain cycle, particularly in the automotive industry, impacting customer satisfaction and profitability. Of course, any supply imbalance typically yields price increases, additional costs and ongoing administrative work in order to align supply to demand. At a minimum, we are all learning how fragile supply chains are and the extraordinary efforts required to make supply match demand when disruptions occur.
Andrea Tellatin, CEO of Twinkly:
Some retailers like Best Buy are already stocking and selling in the Spring and Summer. But will there be enough stock to get to the Winter holidays? Maybe not. It is surprising how every year we are selling between 2 and 3 times more than the year before and every year we sell out by the end of November. There is no question many brands will not be on the shelves for Christmas time. Some of them have already announced there is no more product availability for the year. And I do believe the worst is yet to come. This crisis is just the tip of the iceberg, and the full industrial ecosystem will face long-term consequences, from transportation availability, to process inefficiency. All of this will have an impact on availability and prices.
The pandemic has illuminated an existing problem; capacity is not meeting the high demand for chips. The cost of goods is significantly greater than it was a year or two ago, and in turn, consumers are paying more due to poorly managed supply chains. Initially, the pandemic brought automobile demand down, but then people began working from home and needed to buy digital solutions (e.g., networking equipment, AI) which use the same chips. Ultimately, while demand slowed down in some areas like automotive, it quickly accelerated in others.
The future is uncertain; however, there’s a strong effort being made to improve strategic relationships, communication and visibility. The chip shortage and high cost of goods will only gradually improve when manufacturers become more receptive to market signals outside of their respective sectors. This is a process that needs to be fixed and will remain a challenge for the next several months.
Adam Khan, founder of AKHAN Semiconductor:
There are and will continue to be countless negative outcomes from the current chip shortage, but one beneficial outcome will be increased funding and support for advanced material semiconductors as an alternative to traditional silicon materials. These materials are the future of the industry and will have the ability to bring the US back to a place of technological supremacy on a global stage.
Advanced materials, like diamond, have many advantages: handling more power, taking up less space and withstanding much higher voltages and temperatures. They are also more cost effective and environmentally friendly. As the world looks for ways to bring technology into the next era, advanced materials are going to play a massive role in driving innovation within the semiconductor industry and their chance to shine begins now or in the very near future.