Business Tech: Major effects of supply chain shortages on the tech industry and its consumers

Bahar Ferguson

By now, it seems like the supply chain shortages have impacted just about every consumer product on the market. From toilet paper and breakfast cereal to exercise equipment and holiday gifts, it’s not uncommon for the average American to be staring down empty shelves at the grocery store or “out of stock” notifications on online orders.

Although the busiest shopping season of the year has come and gone, the supply chain issues persist. The product that remains the most affected: Computer chips.

As we move into the third year of navigating the supply chain problems, the tech industry is one that continues to struggle. The shortage of computer chips continues to threaten production of a variety of consumer products from smartphones to dairy.

What are the primary factors affecting the supply chain shortages?

The supply chain issues can be attributed to two main factors: increased demand and labor shortages. As of November 2021, U.S. consumer spending was about 20 percent higher than ever before. Since the pandemic has shifted spending habits, that spike is largely concentrated around goods rather than services. Instead of spending on a concert, restaurant meal or other service-based experience, consumers are redirecting their money to retail. That demand for physical goods has caused a huge strain on the supply chain.

The supply chain is even further shortchanged by labor shortages, particularly in the transportation and logistics industries. The American Truckers Association reported a shortage of 80,000 drivers at the end of 2021, a record high and a 30 percent increase from before the pandemic. Between an aging driver population, low wages and unattractive benefits, that gap likely won’t be filled any time soon. Other areas of the logistics sector, like rail, ports and warehousing, are similarly strapped for personnel and are contributing to supply chain shortages.

How long are these problems expected to last?

The short answer? It’s nearly impossible to say. Even if consumer demand settles and the labor force starts to backfill, the supply chain will still be plagued by much larger, systemic problems. The current shortage is exposing flaws in U.S. infrastructure that will take great effort to remedy. U.S. ports, for instance, are far behind the efficiency and operation of international ports. It’s becoming increasingly clear that the U.S. ports cannot handle the capacity required of them to keep up. Finding the solution to the supply chain in the long term will require intense cooperation from both the U.S. government and the private sector.

What does this mean for the tech industry?

At its core, the supply chain disruption is causing tech companies to severely cut back on production. Apple’s production of iPads was sliced in half last year. The company reverted to repurposing old iPhone components to keep the development of the new iPhone 13 going. Nintendo cut back on producing its popular Switch console due to the shortage. In the short term, these adjustments will greatly impact sales and revenue for these tech companies.

The shortage has other, more long-term implications. The lack of chips is also threatening the development of new technology. Computer chips were integral in the development of new 5G technology, for instance. Companies looking to make strides in automation, AI and other innovations are at risk of much slower development as they await their integral hardware and software supplies. What that slow-up in innovation means for the future of the industry at large remains to be seen.

How does it impact consumers?

While the supply chain shortage may not be as apparent as it was during the holiday season, consumers are still feeling the fallout. The impact goes far beyond the complications and delays that now come with purchasing an iPad, gaming console or other tech product. The shortage significantly affected the car industry, leaving entire manufacturing plants to close, factories to shut down temporarily and eager consumers waiting months to finally get behind the wheel of a new vehicle.

Other, less obvious shortages can also be traced back to the lack of computer chips. Dairy has been impacted due to the need for chips to power refrigerated trucks used for transportation. Consumers that relied on niche services that provide high-tech options for low-tech tasks, like dog washing, may now have to pivot their habits.

Is there a solution?

Currently, there is no clear solution to getting the computer chip supply back on track. One proposal centers around bringing chip manufacturing into the United States to eliminate the reliance on overseas production. While that’s one way to solve the long-term supply chain problems, the short-term work and expense are likely not viable in the current climate, not to mention that the immediate issues at hand — increased demand and the labor shortage — have yet to see necessary relief.

The supply chain disruption is expected to last well into 2022, if not longer. To try and combat the issue, try to plan as far as possible on necessary equipment purchases. Whether that be anticipating new hires over the next year or simply working with your IT partner to plan ahead for replacing aging machines, doing so will proactively minimize the pain caused by this disruption.

Bahar Ferguson is president of Wasatch I.T., a Utah provider of outsourced IT and managed compliance services for small and medium-sized businesses.