Electronic Christmas presents could be in short supply thanks to shortage of semiconductor chips

There could be a lack of popular electronic Christmas presents available this year due to the global semiconductor shortages.

Items such as laptops, smartphones and games consoles could be in short supply as the pandemic left fewer semiconductors being manufactured than usual at the same time that demand for electronics surged.

Even tech giant Apple have been affected with the firm rumoured to be cutting production of the iPhone 13 due to the shortage.

While many know about how the motoring industry has faced issues as a result of the lack of conductor chips, it is not as commonly known how much we rely on the chips for everyday products.  

Semiconductor chip shortages could lead to a shortage of electrical items this Christmas

This includes items such as toasters and washing machines.  

This is Money, with help from experts, looks into what caused the shortage, what products could be in short supply and when this is likely to end.  

What caused the semiconductor shortage?

The shortage began due to the pandemic as fewer semiconductors were manufactured than usual at the same time the demand for electronics increased.

This backlog, combined with other factors including tighter international restrictions on movement of supply and increased cost of shipping, has had a domino effect across multiple industries, one of the most badly affected being the car industry.

The Society of Motor Manufacturers and Traders is predicting the chip crisis to wipe 100,000 off the UK’s total car production for 2021.

Wayne Lam, Senior Director at CCS Insight, said: ‘Semiconductor manufacturing has always relied on scale to make manufacturing economically rational. 

‘When the pandemic hit, chip making was significantly disrupted.

‘Leading indicators of broad job cuts and uncertainties brought on by the initial lockdown clouded everyone’s near term plans.

‘Therefore, given the limited information chip makers had at the time, a concerted effort was made to moth-ball old semiconductor fabrication plants and rebalance their product mix towards higher margin products like leading edge process node chips, for example, think the chip in your smartphone.

‘This move cut down the capacity for older and “mature” silicon processes which instantly created a shortage. 

‘Mature process manufacturing accounts for nearly half the global semiconductor revenues so it’s not an insignificant portion of the global market.’

Car manufacturing is one industry which has been deeply affected by the global chip shortage

Car manufacturing is one industry which has been deeply affected by the global chip shortage

How does the shortage affect electronics?

Semiconductors are a critical part of electronic devices without them they won’t work and therefore cannot be made.

This includes a number of household items including toasters, washing machines and fridges.   

Firm, Leasing Options, warn this is why so many electronics are predicted to be impossible to buy this Christmas.

Which presents could be in low supply?

Leasing Options has revealed the Christmas presents most likely to be in short supply this Christmas.  

1. Smart phones and watches: The iPhone 13 will not be the only smart device to be in limited supply this Christmas. 

Samsung Galaxy S21 FE was set to launch in August, however, it has now been delayed until the end of October instead, with rumours this was due to chip shortages.

2. Laptops: Semiconductors are a fundamental part to running laptops. Therefore, shoppers should expect brands like Acer, Dell and HP to be running low on manufacturing laptops in time for Christmas. 

3. Household appliances: Everyday household appliances such as toasters, washing machines and fridges are victims of the shortage too. 

It goes to show how much semiconductors are part of our everyday life without many of us even realising.

4. Games consoles: The release of the PlayStation 5 and Xbox Series X|S in 2020 played a major part in the semiconductor shortage due to demand being so high for the consoles. 

The shortages of these consoles remain a problem in 2021 and according to manufacturer Toshiba this could last until 2023.

5. TVs: Most high-end TVs use semiconductors to get a greater screen definition. Any TVs with a screen using organic LED (OLED) technology will be at risk of being affected by the shortage.

Lam added: ‘As we head into the Christmas and holiday gift giving season, this supply chain constraint will be very pronounced as goods that typically come weeks in advance from factories in Asia are all tied up at ports or perhaps still on ships moving around the globe.

‘The general consensus that automobiles are the most impacted followed by products that require less sophisticated silicon such as home appliances and toys – basically your normal holiday gift giving fare.

‘How severe this shortage will be is hard to tell but it has been over a year and the global supply chain is working itself out.’

Gaming consoles are one of the popular Christmas present items that could be limited

Gaming consoles are one of the popular Christmas present items that could be limited

When will this shortage end? 

Experts have predicted the shortage could go on for another year or so.  

Lam said: ‘We will see chip supply constraint throughout the next year with supply and demand coming back into balance towards 2023. Chip companies are also wary of adding too much capacity too quickly which may result in plummeting chip prices.

‘The goal for the industry is to unwind the huge supply chain kinks introduced the past 18 months and get back to some steady state.

‘Until all the kinks are worked out of the global semiconductor supply chain, we will be living with one sort of shortage or another. 

‘Ultimately, markets are a very efficient construct and ultimately when things return back to ‘normal’ the market forces of efficient markets will help steady the ship and bring supply and demand back into balance.’

Other experts believe the shortage should encourage more production of chips in the UK.  

Craig Melson, Associate Director for Climate Change, Environment and Sustainability, added: ‘Semi-conductors are vital for the modern world and we think the current shortages and disruptions will normalise in the next six to nine months.

‘The semi-conductors shortage opens a challenge for government to create a business, trading and regulatory environment that attracts manufacturers to start chip production in the UK.’

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