Companies Look for Ways to Circumvent the Chip Shortage
Companies are now responding with some out-of-the-box approaches to deal with the two-year shortage of chip production.
One of these approaches comes from car makers who appropriate semiconductors made for washing machines, rewriting code to run their products on chips that use less silicon, and shipping their products without chips with a promise of adding them later.
McKinsey has created a dedicated team to source chips for their clients from alternative sources, including Morocco, the Netherlands, and Japan. They are also considering chips that slightly differ from the one demanded. This has also provided an opportunity to the chip manufacturers to raise prices, and companies have no choice but to accept the price surges.
One of the reasons for the shortage is the increase in demand for equipment from employers working from home during the pandemic. Another reason was the hoarding of chips by the distributors who suspected US-China relationships to deteriorate further. Lastly, the disturbance in global supply chains during the lockdown made the distribution of chips difficult.
One of the hardest hit industries is the automobile industry. Car producers took to removing some features that required a chip to function instead of halting production. For example, Cadillac removed the hands-free feature, Tesla removed the USB ports, and Ford shipped cars without non-critical features that could be upgraded later.