Why the price of Chips are increase?

How we should solve the problem of IC chip shortage？

Chips are called the heart of electronic products. It is equivalent to the main board of the computer and controls the entire computer system. Its volume is very small, but it plays a vital role.

Products in many industries need chips, so the role of chips is very critical. For example: computers, televisions, computers, drones, robots, rockets, satellites, mobile phones, cruise missiles, submarines, airplanes, cars, cameras, air conditioners, refrigerators, nuclear magnetic resonance machines, color Doppler ultrasound machines, X-ray machines, etc. all need chips. In short, the demand for chips is very large.

But with the outbreak of the Covid-19, the shortage of IC chip supply has become a global problem. While the chip industry is being affected, prices are also rising.

Under this circumstance, how should the affected enterprises survive and develop?

Since December 2020, the automotive industry has been affected by the shortage of chips, which has caused Volkswagen’s ESP to be unable to produce, and about 15,000 vehicles are facing a reduction in production. In addition, Audi, Daimler, BMW, Toyota, Nissan, Subaru and other car companies are also affected by chip shortages. According to news reports, Honda Motor is preparing to cut production due to the shortage of automotive chips. In Japan, the production of some models has been suspended due to the shortage of chips. Honda is currently guaranteeing output through model substitution. In addition to the automotive industry, the communications, computers, and household appliances industries are all facing major chip shortages.

From the responses of the above companies, it can be seen that the current chip shortage is a serious situation, and companies need to constantly adjust their status to deal with it.

What makes the IC chip in a state of shortage?

Reason 1: The Covid-19 has caused short supply:

a. Due to the outbreak of the Covid-19, anti-epidemic materials such as ventilators, thermometers, and ear thermometers have been unprecedentedly hot. The demand for chips has increased.

b. The spread of the Covid-19 has caused the upstream and downstream industrial chains to stagnate. The sudden increase in demand has led to a backlog of orders and continued high chip prices.

c. Due to the Covid-19, many chips and their related factories cannot be fully started, and their production capacity cannot be fully utilized.

d. People are required to look forward to studying or working at home, leading to an increase in demand for tablets, laptops,electronic entertainment products and etc...

Reason 2: The enterprise overstocking leads to increased demand:

In order to cope with the shortage of chips, some manufacturers have increased their inventory to prepare for emergencies. Increased procurement leads to increased demand.

Reason 3: Reduced production capacity caused by natural disasters:

Natural disasters such as the earthquake in Japan and the cold current in Texas have made the global chip shortage intensified. The earthquake has had a huge impact on Japanese companies. Shin-Etsu Japan, which monopolizes 20% of the photoresist market, announced the closure of its factories. It is well known that Japan is a monopolist in the photoresist field and occupies 80% of the market in this field. It is the most important consumable in the chip manufacturing process and is directly related to the quality of the chip. This undoubtedly exacerbated the global chip shortage crisis.

It seems that this crisis is difficult to resolve in short time, many manufacturers are facing severe challenges, and the electronics manufacturing industry has also undergone a series of tests. At present, due to the changes brought about by 5G communication technology, and based on the effectiveness of epidemic prevention and control in China, coupled with the demand for non-mobile phone market applications such as NB, tablets, wearable devices and the development of new energy vehicles driven by the housing economy, the development of the electronics industry Here comes a new boost.

So, what should we do when raw materials such as chips are out of stock and chip prices are rising?

1. Under the condition of ensuring product quality, actively seek lower-priced PCB manufacturing and assembly suppliers.

2. The purchase quantity can be appropriately increased and the unit price of the product can be reduced.

3. You can seek the help of the supplier, and ask if there are other alternative models for the shortage of components. Turnkey PCB assembly manufacturer may be able to complete manufacturing orders faster.

4. We can produce smaller volume products to meet current needs, and long-term needs can be solved by ordering the components.

It is difficult to solve the problem of chips in the short term, and companies need to have medium or long-term plans. To change this situation, we must abandon all kinds of suppression methods, fundamentally rebuild global trust, and restore cooperation in the global industrial chain.

Faced with this situation, PCB manufacturers should actively contact customers to help customers solve this problem. PCBearth.com provide competetive priced, high-quality PCB manfauctring and PCB assembly for customers. On the issue of chip shortages, we sincerely help customers solve the problem and actively seek alternative types of components to solve the delivery problem. If you need help, please log on to our website www.pcbearth.com or send email ( service@pcbearth.com ) to contact us.