In-depth: Effects of chip shortage, how to avoid impacts

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Posted at 5:56 AM, May 13, 2021
and last updated 2021-05-13 08:18:40-04

OVERLAND PARK, Kan. — Between turning off your morning alarm and driving to work, most people use dozens of microchips without even realizing it.

Those chips are the brains inside products like cellphones, washing machines, electric toothbrushes and so much more.

Right now, there is a worldwide shortage of those chips, which means businesses are adjusting and tech experts are advising consumers on how to avoid paying higher prices.

Inside an unassuming warehouse in Shawnee, Kansas, Pivot International employees are manufacturing circuit boards for laundromats and arcades, among other functions.

Each board contains at least one chip.

“The chip is kind of the driver of that [circuit] board and all [circuit] boards do have some form of microchip on them,” explained Mark Dohnalek, CEO of Pivot International, which is headquartered in nearby Lenexa, Kansas.

When the COVID-19 pandemic hit in 2020, demand for products like laptops and video game consoles skyrocketed as more people worked and entertained themselves at home. At the same time, fewer people were buying cars, so chip makers shifted their resources from autos to personal electronics.

Now demand for vehicles is rising again and chip makers can't keep up.

Sanctions by the Trump Administration caused several Chinese companies to stockpile the chips. Plus a fire at a Japanese chip-making factory and the severe winter weather in Texas earlier this year forced several factories to temporarily shut down.

As a result, many auto companies have had to close assembly plants until the shortage improves, including the General Motors and Ford plants in the Kansas City area. The auto industry uses chips for navigation systems, Bluetooth, automatic brakes and blind-spot monitoring.

Dohnalek and others say the chip shortage means prices are going up and production is delayed.

For instance, Samsung announced it won't release a new Galaxy Note smartphone this year because of the shortage.

In Overland Park, Kansas, the owners of LEVELUP Esports Arena had to open last month without all the computers they hoped to have because of a shortage of computer chips.

“The main obstacle was always equipment,” explained co-founder Josh Garr. “It was just the sheer amount of equipment we had to get to provide a quality experience for all gamers.”

For Dohnalek at Pivot International, the short-term solution means redesigning products to use different kinds of chips, asking clients to prioritize orders and stockpiling inventory.

Long term, Dohnalek hopes incentives in President Joe Biden’s American Jobs Plan and other federal legislation like the CHIPS Act create new chip manufacturing in the United States, Most chip-makers are based in Asia. But making chips is complicated and building a manufacturing facility takes years.

“The lesson learned here is you have to have backup plans for duplicate supply chains,” Dohnalek pointed out. “A more triangular strategy, rather than a singular strategy which is what it had become.”

The CEO thinks the shortage might end by early 2022.

In the meantime, one Kansas City-based technology expert said you should do everything you can to make your current electronic devices last as long as possible.

“Don't panic,” Burton Kelso said. “Make sure you take care of your current tech devices so that you don't have to go out and buy new.”

Burton suggests getting a protector case for your phone. For home appliances and computers, buy a surge protector so they're not damaged in the event of a power surge. If you know that one of your devices is on its last leg, Burton said to replace it now before the shortages and price spikes get worse.