The chip shortage and the supply chain they are wreaking havoc in all sectors. The current uncertainty could affect not only the Christmas holidays and gifts, but also the entire year 2022. Swedish tech-beauty company Foreo dives into the causes of the global chip crisis and explains the possible effects that this phenomenon could have in the beauty sector.
“In the midst of COVID-19, we saw that consumers were strongly inclined towards wellness and mindfulness, causing a skyrocketing demand for our products. We operate in the realm of innovation and smart technology, so of course we are very much affected by the shortage of microchips. We were struggling to keep up with the growing demand, however, with the gifting season ahead, there is a rational possibility that Foreo will run out of chips for the holidays.«, Explains Boris Trupcevic, CEO of Foreo.
The chips, also called semiconductors, house billions of transistors and work like the brain of our electronics. Although you might think that they are only used in computers, tablets and smartphones, they actually power most of our electronics, such as washing machines, refrigerators and even cars, so with the shortage of these vital parts, many companies are left with unfinished products that put the world economy to the limit.
Even before the coronavirus pandemic, the chip industry was undergoing a great pressure by the increase in demand driven by 5G. With the acceleration of digital transformation, the tech industry is under immense pressure to keep up with backlogs, which are increasing. Large corporations are at the mercy of chip suppliers, who cannot keep up with orders on their own.
The pandemic is not the only cause of the disruption of the chip supply chain. Earlier this year, one of Japan’s top vendors caught fire, while a winter frost shut down Intel’s Texas vendor. Another key supplier to Taiwan was disrupted due to the drought, which basically put the tech industry in a halt. global supply crisis. Other challenges are labor shortages and an expensive distribution system.
Research shows that 80% of chipmakers have a hard time finding skilled workers, and the cost of shipping has never been higher. The cost of shipping a 40-foot container from Asia to Europe increased tenfold, from $ 2,000 in 2020 to $ 20,000 in August 2021, reaching an all-time high.
In 1990, up to 37% of chip factories were located in the US, while today this figure has dropped to a meager 12%, making Asian countries the absolute leaders in the production of chips. chips. However, the United States has recognized the strategic importance of semiconductors in the economy and national security and has passed the law “The Chips for America Act” in the Senate, which now awaits the approval of the House of Representatives. The law will guarantee funding for the chip industry at a staggering $ 52 trillion over five years.