The global chip shortage and the impact on retailers

Sadly, empty shelves have been commonplace over the last year and a half, as the Covid-19 pandemic hit supply chains of all descriptions. However, if you have tried to purchase any consumer item containing a computer chip in the last eighteen months such as a new car, a games console or a laptop, you will no doubt have come across severe stock shortages and higher-than-normal prices thanks to the emerging global chip shortage.

What are computer chips?

Computer chips are semiconductors which are an essential component of any computer; they are effectively the brain of the machine and are found in most electrical devices. The manufacture of computer chips takes place in sterile, controlled environments which prevent contamination by dirt and damage by high or low temperatures. These fabrication facilities take years to build, at the cost of billions and there are only a few in operation globally.

The Covid-19 pandemic created a unique set of circumstances which led to a worldwide shortage of chips. As the pandemic hit, major chip buyers suddenly bought fewer chips as they anticipated a significant fall in consumer demand. Coupled with staffing shortages and shipping delays, the global chip supply was quickly depleted. Secondly, the demand for consumer electronics experienced an unprecedented and unexpected surge as people became housebound, and so manufacturers of electronic devices quickly absorbed the excess chips on the market, leading to an overall shortage. Add to this the advent of 5G devices, which require more chips than their 3G and 4G predecessors, and it’s easy to see how a previously abundant component has become all but a scarcity as manufacturers scramble to increase production.

Why the ongoing shortages?

The simple answer is that supply has not yet caught up with demand, even as chip manufacturers work at full capacity. Chip manufacture is controlled by just a handful of foundries, with c.90% of manufacturing occurring in Asia. With so few producers, the industry faces an enormous bottleneck and it could take up to two more years for supply to meet demand, despite companies such as Intel announcing their intent to build new manufacturing plants.

How are retailers affected?

We all remember the empty shelves of 2020 as staffing shortages, shipping delays and panic buying affected retailers and consumers across the UK.  While the supply of essentials such as bread, flour and toilet rolls have resumed to pre-pandemic levels, for those in the business of selling electronics, supply issues are likely to continue for the foreseeable future.

For retailers who are fortunate enough to have a robust supply of products to sell to their customers, there is still the question of the electronic hardware they require to actually serve their customers. Whether it be EPoS till systems for face-to-face sales, or the scanners, printers and mobile computers needed for a busy eCommerce operation, all retailers are likely to be affected by the global chip shortage on an operational level over the next couple of years.

How are RMS handling hardware shortages?

At RMS, we are working closely with our suppliers to source the hardware our customers need.  If you anticipate that you will need new EPoS hardware in the next few weeks or months, please call us on 0800 138 0050 for the latest stock update. And if you anticipate that you will need new EPoS hardware in the next 6 – 18 months, please get in touch to discuss your requirements at the earliest opportunity so that we may meet your needs. With extended lead times and product shortages across the industry, we will work with you to source hardware in the shortest possible timeframe. Whatever challenges we face, we are committed to maintaining full transparency and open communications with our clients on the status of their projects.

To discuss your upcoming hardware requirements, please call our expert team on 0800 138 0050.

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