Struggling to meet demand in ‘Chipageddon’

Categories: Salford Business School

Jonathan Owens, logistics expert from the University of Salford Business School, comments on the shortage of computer chips, which is having an impact on car production in the UK and could start to affect more consumer goods later in the year.

Dr Owens said: “It really isn’t a big surprise that we are seeing problems with computer chip supplies, as this situation has been around for a while, with rumblings going on before the pandemic. 

“With more people working from home, we have seen a demand for more devices to help us do that, and this isn’t just about laptops, iPad, phones etc., we have been using our whitegoods, heating, televisions etc. a lot more too.  

“Unusual high utilisation caused by the pandemic has created a sustained spike in demand for computer chips, even it just meant replacing your circuit board on your central heating boiler.  Also, during the third quarter of last year the automotive industry has come back much quicker than anyone predicted.  As this industry typically operates in low profit margins and relies on ‘Just in Time’ supply chains, it does not stockpile. 

“Therefore, we are now seeing the slowing or stopping of production lines for new cars as supplies of chips are just not there. This slowing will now start to hit other aspects of the supply chain delivering parts to car makers. 

“Demand for consumer electronics has remained consistently strong throughout the pandemic due to online channels and companies here have been able to stockpile to come extent, but even this is proving not enough, with Apple warning of potential shortages for their iPad and Mac products later in the year. 

“It is inevitable there will be shortage will products globally if demand continues unabated and manufacturers are at capacity.  Bringing new capacity online will take up to two years, then it is fine tuning yield, capacity and building the supply chain.  So, it is not going to be a quick fix, unless there is a dramatic downturn in demand, if there is a device you want, don't wait, buy it now.” 

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