Microchip shortage driving price hikes for electronics and woes for Apple


A global microchip shortage means Australian shoppers are facing longer-wait times and higher prices for their electronic goods – and it’s not going to get better any time soon.

Swinburne University of Technology associate professor John Hopkins said the widespread digitalisation of products, combined with supply chain issues and increased spending during COVID, has seen demand for semiconductor chips quickly outstrip supply during the pandemic.

And even the world’s biggest companies have been affected.

When Apple announced record-high quarterly sales on Thursday, CEO Tim Cook admitted ongoing supply constraints linked to COVID and silicon shortages could hurt the company’s sales over the June quarter by up to $US8 billion.

Silicon is a key component in semiconductor chips, which are essential components in thousands of products, including phones, fridges, cars, gaming hardware, and medical equipment.

Now product manufacturers are trying to work through a “huge” backlog while new orders keep coming in – and they can’t keep up.

What microchip shortage means for consumers

Queensland University of Technology professor and retail expert Gary Mortimer said the semiconductor chip shortage has hit car buyers particularly hard.

The shortage means car makers have been forced to either stop or slow assembly lines, leaving the manufacturing process more expensive and driving up prices along with wait-times of up to a year.

This in turn has driven up prices in the used car market as Australians struggle to get their hands on, or afford, new cars.

Gaming enthusiasts are also suffering under the shortage, with Sony’s Playstation 5 still hard to find, and Nintendo slashing production of its Switch console last November.

With even electronics giant Apple highlighting potential shortages, Dr Mortimer said shoppers can expect this to continue amid price hikes of other consumer electronics as the year progresses.

No end in sight for microchip shortages

Although most global pandemic border restrictions have been lifted, Dr Hopkins said the semiconductor chip shortage can’t be fixed overnight.

Not only are manufacturers still working through order backlogs, there are limited semiconductor production facilities, making availability vulnerable to issues such as China’s recent strict COVID lockdowns.

Dr Hopkins said another factor is that once organisations knew there was going to be a shortage, they started stockpiling and panic-buying, just as shoppers did with toilet paper throughout the pandemic.

“It’s really almost like a perfect storm of circumstances that have kind of combined to create this situation whereby not only has demand gone up, but supply has gone down,” Dr Hopkins said.

“There isn’t an end in sight.”

Although Prime Minister Scott Morrison’s said Australia should focus on the local production of semiconductors to mitigate future supply issues, Dr Hopkins said Australia isn’t equipped with a strong-enough manufacturing base for a quick-fix.

CEDA chief economist Jarrod Ball said companies are adapting their technology to be less-reliant on semiconductor chips where possible.

A modern car can contain thousands of semiconductor chips, but Tesla is rewriting software to increase the variety of semiconductors that can be used, and General Motors is working on reducing the number of unique chips it uses down to three microcontrollers, Mr Ball said.

“If this scarcity drives innovation, then consumers will actually gain in the long-term,” he said.

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