If you’ve been trying to modernize your editing rig to handle an 8K post-production future, you may be stuck.
Perhaps you’ve found that parts are priced too high or just not available. The problem is due to a global shortage of computer chips, and it’s not going to go away anytime soon.
What causes this problem is a perfect storm of supply to meet demand, a pandemic, and a well-timed factory fire with supplies tight and prices high.
At the center of this global processor shortage is a phenomenon known as the “bullwhip effect”. It was named by Stanford Professor Hau Lee, who investigated why the availability of disposable diapers (of all things) fluctuated a lot, even though demand was fairly constant.
It turns out that the slightest change in the supply chain like a slight movement of the wrist with a bull’s whip reverberates with exponential consequences. So if there was a slight increase or decrease in diaper demand, the outcome would reverberate down the chain as retailers and wholesalers adjusted their orders in response. The problem is they also add a few percentages because they don’t know what is happening. The consequence would be greater fluctuations in demand that amount to a shortage. The result is measures that can make a deficiency worse.
Now take that thought and place it in the context of recent events. Before the pandemic, computer enthusiasts struggled to find graphics cards because they were bought up by bitcoin miners to generate cryptocurrency. The result was a shortage that caused graphics card prices to skyrocket.
Then 2020 brought the pandemic. As more and more people stayed at home, the first effect was a sharp slowdown in sales of computer processors. Computer parts manufacturers suddenly got stuck in a glut of products. Factories were also closed due to government bans.
A few months later, things began to ease somewhat as key industries were allowed to resume. People also started working from home, and the children took distance learning.
That slight movement, or the wrist, opened a floodgate as makers of everything from phones to computers to cameras began to meet demand. As people were working from home, there was suddenly a demand for new consumer goods. The result was a flurry of orders from suppliers like Nvidia, ATI, and others to meet demand. These companies in turn placed orders for semiconductors and processors with companies such as Samsung and Intel. That created even more demand.
“The problem right now is that there is a lot of panic buying going on,” said Harvard Business School professor Willy Shih told Quartz. “If you’re HP or Dell or Lenovo, you think, ‘I’ll make sure I have enough chips on hand because I’ll be damned if I let my competitors gain market share because they’re in better supplies than me.”
In addition, there was a massive fire in Japan that closed a large factory supplying chips to the auto industry, and Taiwan is experiencing an ongoing drought affecting companies that need water to make semiconductors. The result has been a perfect storm of events that has created a serious shortage of computer processors and chips that is affecting all industries.
Just ask my teen how long it took him to finally get a Playstation 5. The demand is just banana.
Even if the world seems to be finding its way out of the pandemic now, as infections recede and people get back to work, analysts believe the chip shortage will last through 2021 and maybe until 2022.
This could explain why several automakers have shut down car lines, why Canon and Nikon delayed at least two camera models, and why Apple didn’t announce the M1X at the Worldwide Developers Conference when every tech rumor suggested at least three new Macs should be revealed.
Semiconductor companies have even gone so far as to prioritize orders and give companies what they need, not what they want in terms of volumes. Hopefully this type of management will make addressing the shortage easier if done right.
And this is where things get even more interesting. Several semiconductor companies are now planning to build factories to meet demand. However, it will take at least two to three years to plan, build, and equip a factory for production. Additionally, companies like Intel want billions in public subsidies to cushion the risk of building new factories in Europe and elsewhere.
“We demand from both the US and the European government that we are competitive here compared to Asia.” said Intel CEO Pat Gelsinger. Gelsinger calls for eight billion euros in subsidies and even more for the construction of two plants in Arizona.
Of course, by then, the scarcity will likely have subsided, leading to excess product and falling prices. Ask the bullwhip to crack in the other direction
As a result, users looking to upgrade their computers, cameras, and other devices may want to spend more on them or postpone these upgrades until supply can meet demand.