The Widely Felt Impacts Of Computer Chip Production: What It Means For The Supply Chain

The COVID-19 pandemic has brought many lasting effects. While some are more obvious, like the shortage of certain goods at the grocery store, it’s important to pay attention to some of the not so apparent impacts. Over the duration of country-wide shutdowns across the world, it has now come to light that there is a shortage of computer chips or semiconductor production.

How A Shortage Of Semiconductor Production Happened

There are various theories and reasons as to why there was a shortage of semiconductors, four of which stand out to discuss:

Factory Shutdowns

Initially, many blamed the shortage of computer chips on the shutdown of factories as a result of the pandemic. To help control the spread of the coronavirus, many governments forced businesses, including factories, to close. However, since the initial order, factories are up and running again.

Stay-At-Home Orders

However, many are also factoring in how stay-at-home orders played a role. With stay-at-home orders, many workplaces instructed staff to work remotely, requiring hundreds of thousands of workers to be provided with proper technological tools to continue to work. Laptops, computers and other work devices that require computer chips were in high demand in a short period of time. As well, there was a surge in sales for gaming consoles as many consumers wanted something to keep their minds off the pandemic and occupy their time at home.

3G Sunset

Similarly, many are viewing the 3G sunset to factor into the shortage as fleets with 3G vehicle tracking devices will need to upgrade to ensure signal and data collection. Resulting in countless 4G devices with computer chips being ordered and implemented in fleets to beat the 3G network shutdown. Since this is coming as early as October 2021 and continuing through the end of 2022 depending on the service provider, many fleets are preparing and putting orders in for new devices now.

Surge in Cryptocurrency

Lastly, many also attribute the surge in cryptocurrency to have impacted the demand of semiconductors, as miners used the chips for the production of mining rigs. Even though it has been reported that Nvidia is now offering specific cards designed for crypto-mining, the impacts from previous demand can still be felt.

But how do all these factors affect the core of the supply chain?

Impacts to Supply Chains

With less computer chips readily available due to unforeseen demand, the production of tech-heavy vehicles is unable to be supported. With the entire car manufacturing industry buying approximately $37bn worth of chips, a shortage of vehicle production will be just another widely felt impact. In fact, it was already reported by The Guardian that Ford cancelled shifts at two car plants, Nissan is idling output at plants and General Motors as well is feeling the pressure of facing up to a $2bn profit hit as a result of limited or newly high-priced chips.

With less computer chips, fewer vehicles will be produced and supply chain businesses who require new vehicles will either not have mass availability when upgrading their fleet or see higher than expected costs when buying and even possibly repairing vehicles. Proving that even the most unexpected events can have a trickle-down effect and can cause great concern for the core of the supply chains.

About the Author

Victoria Gole is a Marketing, Branding & Communications Specialist at Zenduit, an industry leader in building scalable mobile and web solutions that can be integrated across various platforms and industries. With a number of years in marketing and communications, she is committed to sharing the wealth of knowledge Zenduit has in developing intelligent fleet and field service solutions to bridge the gap between fleet management and technology to increase safety, profitability and productivity in various fleet dominated industries.