What Factors Are Contributing to the Microchip Shortage?

If you’ve found it difficult to buy a new car, grab a PS5, or secure the next smartphone model in the series you love, you’re not alone. Microchip shortages are causing global issues with the supply chain to the point that employees are losing jobs over it.

Automakers like Ford and General Motors are building vehicles without microchips right now, waiting for the time when another shipment arrives so that they can sell something functional.

Although the COVID-19 lockdowns in China didn’t help the problem any, the microchip shortages have been a building problem for several years. Here’s what you need to know about the issue.

1. Inventory Tightness

Consumers are stocking up on electronic products to stay entertained during uncertain COVID times. That means there are fewer supplies available to continue making new products. Customers also bought more vehicles than expected, adding additional strain to the market.

2. Experience Problems

Some workers aren’t coming back to the assembly line or factory after the COVID-19 lockdowns are over. They discovered that a side hustle from home or telecommuting was a better lifestyle, and so that’s what they’re doing. That means there are fewer hands available to get the microchips out to the market.

3. More Need

Everything is getting more complicated with smart technologies. We need microchips for things like refrigerators, microwaves, and almost every consumer electronic. As more industries start placing orders or fighting for inventory, scarcity drives up prices.

4. Warehouse Reductions

The microchip industry had been dealing with significant inventory issues before COVID. It got to the point where they didn’t need to make anything to fulfill orders. By choosing to reduce production right before 2020, the industry had no way to increase activities when demand skyrocketed.

The microchip shortage won’t last forever, but it could cost our economies billions of dollars. That’s why you can see several startups looking for ways to get moving quickly to meet this demand.