Marissa Mohammed

MAN4504.79F21.95973
Professor Alison Watkins
November 20, 2021

Chipageddon Case Study

Introduction
There have been many shortages the world has faced, from food to water, to even clothes.
The latest shortage is a global semiconductor chip shortage. “Chips are in nearly every product in
our modern lives, from computers to cash registers, cars to toothbrushes.” ("chipageddon": What
the global chip drought means for manufacturing and supply chains 2021) This is a shortage the
world has never faced before, and as technology usage continues to rise, there seems to be no
way for this issue to pass.

Cause of Shortage
To begin with, there is no direct cause for the chip shortage. However, due to COVID-19,
many people have found themselves indoors more and using their electronic devices (which
contain chips) above their average norms, increasing the desire for more and newer technology.
For instance, many children were impacted as they could no longer go to school; they had to do
distance learning online. As a result, the demand for laptops, computers, tablets, and even
smartphones rose so children could maintain their education.
On top of all that, when factories and many companies closed down, the factories that
manufacture chips also closed down. Due to that, many other companies who require chips for
their products no longer had them available. Since people were home, it raised the demand for
new electronic devices, household appliances, and many more products that require chips.
My opinion is that when all the businesses opened back up, including chip
manufacturers, the chip company simply could not keep up with the demands from other
companies, nor did they have all the necessary supplies to meet demands.

Lasting Expectancy
It is believed that the chip shortage could last a few years. However, as the pandemic
continues and new products, like cars and phones, are being released, I believe it could last much
longer. Without a set period of time for the chip manufacturing companies to ‘catch up,’ their
workload will only grow as businesses and consumers continue to demand more. This can
already be seen globally as the new Teslas, iPhones, computers, and home cooking gadgets (like
an air fryer) become more desirable as more people work from home.
I also believe that since children of all ages have been exposed to online learning, they
have grown more comfortable with using electronics and desire them more, resulting in them
wanting a new tablet or phone rather than a simple toy that requires no chip.
Industries Impacted
The auto industry has had the most significant impact compared to all the other industries
due to a rise in demand for travel and transportation. Vehicles nowadays contain hundreds if not
thousands of sensors, cameras, interactive radios, and many more other electrical parts apart
from the standard car parts that require hundreds of chips. Due to the shortage, many automakers
are forced to slow down or even stop their new cars’ productions. Sadly, this means millions of
vehicles will not be produced as initially thought, and companies have to reduce the number of
vehicles they can sell, let alone produce for the time being.
The following top impacted companies are electronic companies, like Apple, HP,
Toshiba, Dell, etc. Due to the pandemic, demands for electronic devices have risen, and these
companies took advantage by producing new products and updated versions of older products.
For example, Apple always has a new product coming out; whether it is a phone, computer, or
watch, it is always new and in high demand. Surprisingly electronics are not relatively as high on
the chip shortage list because semiconductors used in cars are not fit for electronic devices,
meaning they require different kinds of chips. Nonetheless, electronics is still a significant
contributor to the global semiconductor shortage.
The same goes for appliances like blenders, fryers, grills, microwaves, dishwashers, etc.
Since more people have been confined to their homes, new hobbies like cooking have spiked.
People now have time to replace old, outdated appliances, resulting in impacting the appliance
industries. Whirlpool has admitted that they had to decrease their production by 10% to comply
with the shortage and even endured some losses due to lack of appliances during their annual
labor day sales, where they receive most of their business. The company confessed it was hard to
meet customer demands as their products flew off the shelves, and they had to turn away
business due to not being able to provide products.
Another industry impacted is the LED lighting companies, as many of their lights are
powered by chips now, and to no surprise, the chips became increasingly hard to locate. Since
chip-powered LED lights are fairly new and exclusive, the price rose, contributing to inflation.
LED chipmakers in Taiwan have predicted that demands for LED chip-powered lights would not
be met until at least a year has passed.
Solar/turbine power industries have also fallen victims to the chip shortage. Despite their
products being manufactured from aluminum or steel, the product still contains many
semiconductors and sensors to help them function. Enphase Energy has shared that because the
chip shortage does not seem to be ending any time soon, renewable energy goals will be delayed
drastically by years.
Ad-Hoc Surveys
I am on the luckier end of things and have not been personally impacted by the shortage.
I’ve ordered a new iPad, a new clock, and even an Apple watch (SE) with no issues. In fact, I
was almost oblivious to the fact that there was a shortage because I could go into any store and
pick up what I wanted with no problem.
However, after completing an ad-hoc with my parents, I soon realized they had been
impacted. For Christmas, my father and I decided to buy my mom the new Apple Watch 7. It
took nearly two months before they could ship it due to the high demands of the new product,
but also because of the chip shortage. As people who have ordered from Apple before, it was a
massive shock because typically, you can order something from them, and it’ll be shipped out
within the hour and delivered within the week of ordering.
Recently my father’s truck was hit, and when he took it to Toyota to get it fixed, they said
they could not receive any new parts for a few months. After that news, he decided just to
browse around and look at the new trucks only to find that there were none. Not even an old
model waiting for a new home. This was due to the chip shortage, and Toyota shared that they
simply could not get enough trucks manufactured and had to put a halt on selling and producing
their trucks. The ones they did have went reasonably quick, even with higher prices.
After surveying a few of my friends, it turns out none of them have been impacted that
much either. It was concluded that since most of our products are on the older end (purchased
before the pandemic) or we ordered older models of the products that were most likely already
produced, it did not impact us.

Strategizing
A solution to lessen the impact could be for companies to take an inventory of what they
have, need, and what can wait to be produced (items not in high demand). By doing this, the
company will have adequate time to plan ahead and order its semiconductors in a timely manner.
Instead of purchasing their usual amount, they only buy what is needed.
Another solution could be for chip manufacturers to stop distributing to more minor or
private-owned businesses. Sadly, they don’t get as much business as larger/more popular
companies and take away the necessary parts. If anything, there could be a month when small
companies are allowed to place their ordered semiconductors, but overall, chip manufacturers
should only produce chips for larger companies.

Domestic Manufacturers
I do not think domestic manufacturing can help prevent future shortages or supply chain
constriction, mainly due to the fact that production will become more limited. If production
becomes more limited, the demands cannot be met, and the chances of the shortage lasting
longer will only grow.
The only benefit would be that production would cost less, but as mentioned before, this
does not outweigh the factor of production limitation.
Conclusion
 During the pandemic, COVID-19, all businesses had to shut down globally. As a result,
the world experienced a semiconductor chip shortage. It has drastically affected the auto
industry, the electronic industry, the appliance industry, and many more. As companies try to get
back to normal after the global pandemic, it continues to become increasingly hard to reach
demands for their businesses and consumers as chip manufacturers cannot meet the constant
demands.
The problem only seems to grow, and a way out gets harder to find. The production of
chips has increased and continues to grow as everyone searches for a new way to get the
shortage under wraps.

References

"chipageddon": What the global chip drought means for manufacturing and supply chains.
SAGE Knowledge. (2021, July 6). Retrieved November 20, 2021, from
[Link]
supply-chains.

Dooley, D. (2021, June 7). 4 sectors hardest hit by the Global Chip Shortage.
FierceElectronics. Retrieved November 22, 2021, from
[Link]
shortage.

Lisa, A. (2021, August 24). 4 critical industries affected by the chip shortage.
GOBankingRates. Retrieved November 22, 2021, from
[Link]
shortage/.

Pros and cons: International vs. Domestic Manufacturing. Pivot International. (2019,
December 21). Retrieved November 22, 2021, from [Link]
and-cons-international-vs-domestic-manufacturing/.