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The Computer Chip Shortage: Catch 22

May 20th, 2023 by Michael Dyet

Hmmm, are we in a Catch 22 scenario when it comes to computer chips?

In anticipation of my retirement at the end of March, I decided to give myself a retirement gift. I ordered a DSLR camera, with an 18 – 135 mm lens, from the Henry’s website on February 18. Delivery was specified as four to eight weeks which meant it should arrive by mid-April. Perfect timing, right? Well, not so much.

Three months later the camera is still on backorder. The delay is a result of the shortage of computer chips for electronic devices and automobiles. I did a bit of Google research to try and get a sense a better sense of the problem.

The problem dates all the way back to 2019 when the U.S. placed restrictions on the export of American technology, including computer chips, to some Chinese firms. Chinese manufacturers responded to that blacklist by stockpiling semiconductors needed for computer chips.

Them along came the COVID-19 lockdowns when demand for work-from-home technology increased exponentially. Manufacturers had to compete for semiconductor capacity in Asian foundries. Downstream operations in Asia, in particular Malaysia, were impacted by COVID-19 creating further bottlenecks in the supply chain.

And then in early 2021, a couple of dozen machines were destroyed in a fire at a semi-conductor plant in Japan that makes about one in three microcontroller chips. Around the same time, power shortages caused by an extreme cold snap in Texas forced Samsung, Infineon Technologies and NXP semiconductors to temporarily halt chip manufacturing.

Other supply chain issues factor into the mix: labour shortages, ocean freight bottlenecks, increasing inflation, global port congestion, warehouse shortage, financial sanctions in Russia closing off transport routes, climate crisis regulations enacted to reduce emissions along global supply chains.

In summary, the not-so-short answer to the chip shortage is a combination of pandemic shutdowns, geopolitics, increased demand, supply chain issues and plain old bad luck. In effect, a perfect storm of circumstances.

But I believe there is another more insidious issue involved.

Whenever there is a shortage of a particular item, the unit price for that item skyrockets. Profit margins for the suppliers of that item get fatter. In theory, the unit price should come back down when the shortage ends. But the suppliers rather like the higher profit margin so they stockpile the item and release it in dribs and drabs to prolong the shortage.

So it is a Catch 22 situation. The shortage causes higher demand which causes higher prices which encourages the suppliers to hold back inventory which perpetuates the shortage.

The short answer as to when I can expect to receive my camera is Your guess is as a good as mine. I am a victim of the Catch 22 scenario. I may have to fly to Malaysia, meet a black market dealer in a back alley and hope they do not knock me in the head and run when I hand over my hard earned money.

~ Now Available Online from Amazon, Chapters Indigo or Barnes & Noble: Hunting Muskie, Rites of Passage – Stories by Michael Robert Dyet

~ Michael Robert Dyet is also the author of Until the Deep Water Stills – An Internet-enhanced Novel which was a double winner in the Reader Views Literary Awards 2009. Visit Michael’s website at .

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