Chip Shortage Crisis

by Ian Pinkos

Shortages in silicon computer chips are leading to increased inflation and rampant price manipulation in the tech sector. We are seeing companies trying to create powerful technology but they quickly realize that the expansion comes with great costs as they see computer chips becoming more valuable by the day, should we question if we need to slow our role and gather the resources before expanding?

People want goods produced efficiently. Whether it is beds, kitchen appliances, phones, cars, computers, or  washing machines, people want them produced efficiently. Manufacturing efficiency requires the power of electricity and technology.  However, technology comes at a price. Currently,  prices in the tech market are skyrocketing, as manufacturers battle a worldwide computer chip shortage. These small computer chips act as the brains of the circuit board, and they are manufactured in extremely expensive buildings called semiconductor manufacturing plants. Over the last several years, funding for the construction of new semiconductor manufacturing plants has been scarce, and semiconductor plants cost a lot of money. “Chips are a very slow-moving business. I’ve seen estimates that it costs $10 billion with a ‘B’ dollars to stand up a new chip manufacturing plant,” said Sloan. “There’s a very big time-lag in chips because of the cost and difficulty of establishing manufacturing plants.” 

Companies are having to pony up big bucks for silicon computer chips and those increased prices are being passed on to the consumer. Since these computer chips are what almost every piece of technology uses to complete functions, we find these computer chips in almost anything that has an electrical current going through it nowadays. A shortage in such a physically small thing can cause a dramatic impact on the inflation of prices for the average consumer. 

The corporations that distribute products worldwide have the ability to directly adjust the amount consumers have to pay to get products. This leads to rises in prices for things that used to be affordable. The automotive industry is struggling to keep prices down on new vehicles, as the chip shortage has resulted in a vehicle shortage across the industry. Many Americans use a car for daily transportation, so it is crucial for them to be affordable. However, as these shortages in computer chips continue, prices are worsening. For example, “In 2008 the average MSRP (manufacturer suggested retail price) for a car was around $23,900.” In 2020, according to Kelley Blue Book, the estimated average transaction price for a light vehicle in the United States was $37,876.” While cars have certainly improved since 2008, not only safety wise but also reliability and quality wise, the higher price tags today outweigh the technological advancements. Car manufacturers, and not consumers, should pay for the shortage in computer chips. The car companies, however, argue that the increase in price directly ties to the increase in performance of their vehicles.

So, are consumers paying for better performance or chip shortages? Yes, one can argue that technology is getting better over the years. People will pay for improvements, however, what if the price changes are really from the companies’ lack of supply management? Is that fair? It is the manufacturers’ responsibility to control their supplies and make sure they have enough supplies for their projects. Ali Rabbani, a technology enthusiast, weighed in on the price increases, saying, “I think the prices of technology are a direct reflection of the performance increase. That being said, I think companies should see that they need to have the right amount of supplies to expand because expanding too fast leads to inflation due to shortages.”

In conclusion, the microchip crisis is stressing the markets in ways not previously seen. The reliance on computer chips makes producing appliances extremely expensive. One of the last things consumers need, especially in a pandemic, is to have essential appliances be overpriced. Corporations should focus on properly funding manufacturing plants and on making a steady amount of computer chips or even find ways to make these chips out of more renewable resources if possible. Consumers should also try not to get too caught up in upgrading technology too fast, because if consumers upgrade faster than the production of computer chips can handle, then consumers will see direct effects to the markets overall. The more consistent and balanced the production of these important computer chips; the more balanced our markets will be for technology.

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