The chip crisis has been going on for a while, and it is the result of numerous events. Even before the pandemic, the semiconductor industry was struggling to meet the increasing demand. And the industry’s existing inefficiencies were only deepened by the Covid-19 pandemic.
In recent years, the rise of 5G technology has increased the demand for semiconductors. Additionally, back in 2020, the U.S. – China economic conflict also impacted the industry, as the U.S imposed sanctions on China’s larger chip manufacturer, making it harder for them to sell to American companies. As a result, companies had to look for other manufacturers, who were already working at maximum capacity.
Another significant event was the Covid-19 pandemic. Remote work and online learning increased the demand for laptops, tablets, computers, and webcams, which all rely on chips to work. But as demand increased, lockdowns forced many production centers to close, so they were unable to match the growing demand.
Weather conditions around the globe also contributed to the chip shortage. Back in 2021, Texas was hit with heavy snow storms that forced factories to shut down. And in 2020 – 2021, a couple of Japanese factories that specialized in chip components caught fire, adding more delays to chip production.
Supply chain issues also contributed to the crisis, as the world faced a shortage of shipping containers. Air freight fees also increased, and there was a significant shortage of truck drivers and workers, especially in Europe. All these resulted in additional costs and an overall price increase in transportation.
Now, Russia’s invasion of Ukraine continues to disrupt the chip industry. Ukraine is a top producer of Neon, -used for lasers in chip manufacturing-, Krypton, and Xenon. Russia exports palladium as well, which is used in certain chip components. As western countries continue to sanction Russia economically, access to these vital chip components is not possible. As the war unfolds, manufacturers continue to search for alternate suppliers, but increasing production will take at least 9 months.
What can you do?
For now, as the shortage continues, companies must look for options that may help mitigate the effects. Looking at the pre-owned equipment market is a great way to ensure the availability of raw materials, without having to worry about production delays. EquipNet’s MarketPlace has ready to use and high quality inventory for Industrial equipment and other industries. Contact us to get started, so we can help you find the equipment that you need.