The Computer Chip Shortage: Catch 22
Hmmm, are we in a Catch 22 scenario whenit comes to computer chips?
In anticipation of my retirement at theend of March, I decided to give myself a retirement gift. I ordered a DSLRcamera, with an 18 – 135 mm lens, from the Henry’s website on February 18.Delivery was specified as four to eight weeks which meant it should arrive by mid-April.Perfect timing, right? Well, not so much.
Three months later the camera is stillon backorder. The delay is a result of the shortage of computer chips forelectronic devices and automobiles. I did a bit of Google research to try andget a sense a better sense of the problem.
The problem dates all the way back to2019 when the U.S. placed restrictions on the export of American technology,including computer chips, to some Chinese firms. Chinese manufacturersresponded to that blacklist by stockpiling semiconductors needed for computerchips.
Them along came the COVID-19 lockdownswhen demand for work-from-home technology increased exponentially. Manufacturershad to compete for semiconductor capacity in Asian foundries. Downstreamoperations in Asia, in particular Malaysia, were impacted by COVID-19 creatingfurther bottlenecks in the supply chain.
And then in early 2021, a couple ofdozen machines were destroyed in a fire at a semi-conductor plant in Japan thatmakes about one in three microcontroller chips. Around the same time, powershortages caused by an extreme cold snap in Texas forced Samsung, InfineonTechnologies and NXP semiconductors to temporarily halt chip manufacturing.
Other supply chain issues factor into themix: labour shortages, ocean freight bottlenecks, increasing inflation, globalport congestion, warehouse shortage, financial sanctions in Russia closing offtransport routes, climate crisis regulations enacted to reduce emissions along globalsupply chains.
In summary, the not-so-short answer tothe chip shortage is a combination of pandemic shutdowns, geopolitics,increased demand, supply chain issues and plain old bad luck. In effect, a perfectstorm of circumstances.
But I believe there is another more insidiousissue involved.
Whenever there is a shortage of aparticular item, the unit price for that item skyrockets. Profit margins forthe suppliers of that item get fatter. In theory, the unit price should come backdown when the shortage ends. But the suppliers rather like the higher profitmargin so they stockpile the item and release it in dribs and drabs to prolongthe shortage.
So it is a Catch 22 situation. The shortagecauses higher demand which causes higher prices which encourages the suppliersto hold back inventory which perpetuates the shortage.
The short answer as to when I can expectto receive my camera is Your guess is as a good as mine. I am a victimof the Catch 22 scenario. I may have to fly to Malaysia, meet a black market dealerin a back alley and hope they do not knock me in the head and run when I handover my hard earned money.
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