Over the past 18 months, there has been a shortage in semiconductor chips, which are essential in the manufacture of electronic equipment and devices. In this article, we outline the current situation and discuss the likely impact of this shortage on Caribbean consumers.
Semiconductors and semiconductor chips are integral components in modern electronics, as they are in most devices and equipment that we interact with on a daily basis. For example, they can be found in the basic mobile/cellular phones, smartphones, vehicles, computers and household appliances. Further, as we move to even more connected homes and societies, semiconductor chips have increased in importance, as they continue to be the core building blocks of all digital devices.
However, starting from mid-2020, there has been as global shortage of semiconductor chips, which has had an ripple effect across all industries. Although the pandemic reportedly did not cause the shortage, per se, as there had been a decline in the demand for chips in pre-2020, with chip manufacturers adjusting to suit. However, the uptick in demand for computing devices for example, due to the pandemic in 2020, put a strain on the existing supply chain, resulting in the shortage we have been experiencing.
Currently, the most optimistic predictions suggest that the chip shortage may end in 2022, whilst others anticipate that the shortage will continue well into 2023. Moreover, it might be at least two years before the impact of an increased supply chain is felt here in the Caribbean region. In the meantime, here are some ways in which Caribbean consumers are likely to be affected by the global chip shortage.
Delays in fulfilment
Due to current and high demand for various electronic devices, and as has already been occurring, orders are being delayed, or longer than normal lead times for fulfilment of orders is being experienced. To a considerable degree, a knock-on effect is occurring within the supply chain. The shortage of semiconductor chips, results in delays in device manufacture, which in turn is being exacerbated by the demand. As a result, two scenarios are likely, and to some degree have already been occurring: either entire orders to the Caribbean region are being delayed; or partial orders are being received over a period of weeks or months, to gradually try to satisfy some of the pent-up demand.
New devices are not as readily available
Following from the previous point, Caribbean suppliers may have to be more conservative with their orders based on stock availability. It may thus mean that either the size of the orders that they would have made is smaller, or they would need to accept partial fulfilment of orders, based on the availability of goods.
From the consumers’ perspective, new digital devices or equipment might not be in stock locally, or as readily available as would previously have been the case. Over the past several months, for example, there has been a shortage of laptop and tablet computers in many Caribbean countries. Occasionally new orders would arrive, but they are readily snapped up within days or weeks, and others who in need are left without.
Price for new devices could increase
We have already experienced price increases as it relates to food. Food prices and the overall cost of living has increased worldwide, and more so in the Caribbean region. Transport and logistics costs have increased, along with the price of fuel, labour and other inputs, which all contribute to the prices consumers are required to pay.
With regard to electronic devices, two situations are likely to occur. First, cognisant of the (relatively) limited spending power of mass customers, prices may remain unchanged, but the features and functionality of devices do not increase appreciably, when compared to previous versions. Second, or alternatively, the newest versions of devices offer the latest features and functionality, but the prices are appreciably higher, and so the focus may be the niche customer, who can afford them and is prepared to pay.
Spare parts may come back in vogue
Finally and over the past several years, the prices for electronic and computing products had consistently dropped, and a more disposable mindset had emerged. To a considerable degree, devices were no longer being manufactured to last. For example, for portable mass consumer products, such as smartphones, tablet computers and even laptop computers, and within two to three years after purchase, a marked decline in performance would become apparent, or the device would start to malfunction. At that time, manufacturers hoped (or expected!) that new purchases would be made, thus replacing older models.
Further, and over the years, manufacturers have made it difficult for their products to be repaired or upgraded, especially by third-party technicians. They have not been making spare parts readily available, and if they did, the prices for the parts and labour would begin to rival that of a new device. In other words, it made more sense to buy a new device than to repair or upgrade an existing one.
However, with the supply of new equipment and devices not as available to satisfy demand, increasingly, repairs and upgrades to current models may have to be done. In the Caribbean region, this development could revive the electronic repair segment, which would have suffered over the years, and potentially, may open up new opportunities in the region.
Image credit: Republica (Pixabay)
