Jul 27 2022

5 Answers to Common Questions About the Chip Supply Shortage

As agencies went remote in 2020, the demand for laptops and other consumer electronics skyrocketed. Here's why.

As agencies went remote in 2020, the demand for laptops and other consumer electronics skyrocketed. This depleted inventories, accelerating the need for computer chips and creating sustained shortages. Here are answers to five questions about why this is continuing.

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What caused the chip shortage?

The main factor has been COVID-19-related factory shutdowns and supply chain snags, the latter caused by the steep increase in demand for PCs for home use. Taiwan’s historic drought in 2020-21 led to a shortage of water needed to make chips; the giant freighter that blocked the Suez Canal for more than 100 days in 2021 triggered one of many ongoing worldwide shipping delays.

Why does the chip shortage matter?

It’s led to sharp scarcity of both consumer and business electronics at the same time as demand for new electronics has soared. In addition, it helped fuel the 8.3 percent inflation rate registered in the U.S. in April 2022, the highest in decades. 

How can agencies cope with the shortage?

Buy as quickly as possible when products become available. Be sure vendors are approved under an official government contract vehicle; that’s one way to avoid lower quality products possibly made with defective chips. And consider this: If you don’t absolutely need the very latest IT, consider delaying the purchase.

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Has the chip shortage affected cloud migration?

Not as much as it has consumers. The business model of cloud providers is based on the sharing of chip-based resources. Cloud providers also design, produce and use their own chipsets, which are optimized for their cloud services. 

When will the shortage end?

Most experts agree the shortage will continue into 2023. Demand remains sky-high, and plans are in motion for new Intel and Texas Instruments foundries in the U.S., which could ease reliance on Asian chipmakers. This will not be a quick fix, however, and no one can predict when the shortage will end.

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