At present, due to a series of unforeseen events, the world is experiencing a worrying shortage of semiconductors (also known as computer chips). Events such as fires, droughts, storms, trade wars, and of course global epidemics.With the global pandemic, the demand for computer chips has also increased Changed the way we entertain ourselvesThis can be seen from the increasing popularity of games and other activities. All these circumstances have accumulated, creating a perfect storm.
Now, computer chips have become almost all the technology we have. These include refrigerators, washing machines, cars, and even your watch. Needless to say the obvious things, such as computers, game consoles and TVs. The fact is that even if manufacturers work 24/7 for the next two years, they will not be able to meet the demand. So, what should freaks do?
Supply chain issues
A flexible supply chain is the dream of every logistics manager. Unfortunately, in this case, the dream is not realized. Traditionally, companies will maintain low inventory levels to reduce overhead. At the time, this strategy seemed to be a wise choice. However, this strategy needs to be resolved immediately after stakeholders are aware of manufacturing-related issues.
For any forward-looking company, one problematic indicator is sufficient. Executives must have an understanding of the trade war. For example, Brexit has been brewing for five years. You will think that there is enough time to make enough preparations. But this is easier said than done.
Brexit is a problem, but it is not a major problem for the technology industry, because chips are manufactured in Taiwan, and most consumable manufacturers have their business bases in China, South Korea, Taiwan and the United States. One of the most serious problems is the trade war between the United States and China.The problem goes back to the Trump presidency, and the main driving factor is Trump Trade blacklist Due to national security concerns, companies like Huawei.
Increase production to meet demand
If you simply increase production to meet demand. To make computer chips, you need a lot of water, and water is one thing that Taiwan does not have. The drought paralyzed the country Several companies in Taiwan have begun to use trucks to transport 156,000 tons of necessary water every day. Although the water is recycled and the supplemental water needed only accounts for 15% of the total water used, it is still an oversized truck in a country plagued by water shortages.
Not only that, the fire at a semiconductor factory in Japan further delayed time, and the untimely cold weather in Texas prevented the development of American manufacturers. All the manufacturer needs is the plague of locusts to complete the task.
Words come true. The emergence of locusts in the form of a global pandemic has shut down daily work practices, making the manufacturing industry three times slower than usual. The transportation system stopped and the world went online to divert one’s attention from reality. The perfect storm is complete.
The events of the past few years are incredible, and the knock-on effect will continue to have a lasting impact. But, to be precise, how long can it last, have we heard you say it?
How long will it last?
Analysts say it will take up to 12 months to catch up and get back on track. After that, it will take another six months to restore inventory levels to average levels. Taking retrospective orders first, as 90% of the existing inventory is reserved, a large backlog of orders has been accumulated.
The United States and China are planning to build new manufacturing plants. Billions of dollars have been invested globally. According to reports, in February this year, US President Biden signed an executive order worth 37 billion U.S. dollars to fill this gap and improve the ability to fulfill orders. But even if all these good intentions get back on track, it will take time.
Hindsight is a wonderful thing
Industry data shows that manufacturing has reached total production capacity for some time. Therefore, rational thinking suggests that experts should develop a strategy before now, or at least you think so? Not having enough buffer is not a good thing, but not having any obstacles to escape the perfect storm is tragedy.
When the chip fails, as it is now, it is recommended to remove the logistics manager from their console, and then return to resilient supply chain management. Trade wars are commonplace, and due to climate change, extreme weather has now become the new norm. Chip famine is not uncommon, and history can be told, and any shortage of any form can be avoided.
The current gain is that the situation will not get better in the short term. It may take at least 12 months for stocks to return to 2019 levels, but 90% of them are required to be used. Unless the United States and China invest in new infrastructure and repair the bad blood left behind by the Trump administration, they will not create a buffer supply.
Technology will become more expensive, but when will it become cheaper? Maybe there was a short time in the early 2000s when washing clothes and TV no longer cost the entire month’s salary. Since then, the supply-demand situation has achieved its always-existent goal and has entered the pockets of consumers.