How The Global Computer Chip Shortage Is Impacting Consumers

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Marixa Salazar walked into a Lexus dealership in Van Nuys, California, ready to turn in her car because her two-year lease was up. 

“We don’t really use the car so we figured, we’ll turn it in now and lease another car in a few months when we need it again,” she said. 

But that isn’t what happened. 

“I talked to the sales guy and he told me ‘You can turn in the car and we will sell it for more money than it is worth,’” she said — it was a better deal for her to switch the lease on her 2019 Lexus to a buyout.

“The sales guy told me, ‘Your car is basically brand new and because it has such little miles on it we can sell it for the full price because there is such a high demand for that car right now,’” she said. “The man recommended changing it from lease to buy and pay off the remaining balance because when we lease a car again later this year, we would be paying more money for it a month than if we just bought the car right now with what we owe.”

After thinking about it for a while, Salazar realized he was right. Vehicles are in such hot demand right now that prices are skyrocketing for leases and purchases, so she would be paying more in the long run if she gave her car back and leased another one later.

“The sales guy said that there are so few cars right now that they are asking people to sell them their cars so they can sell them used,” Salazar said. 

Her daughter, she said, received a letter from Toyota offering her $25,000 for her 2019 Camry, which she owes $20,000 on.

“They are willing to pay her more because they need cars that much,” Salazar said.

This shortage is due to a lot of variables, but one of them is a global computer chip shortage.

Computer chips are the components at the hearts of all kinds of electronics — which modern cars are full of. They form the physical building blocks to make computers and run software. These chips are small but have a complex design that can take years and certain metals to make. 

Currently, the demand for these chips is too high and not enough are being produced. A lot of factors go into this shortage.

One is that the chips can take years to make. Computer chips are built in factories with controlled environments called “fabs,” The Washington Post has reported. Currently, fabs are running at full capacity but it can take months or years for these chips to be released, which means it’s going to take some time for demand to catch up with how much product there is. 

These chips are also made of a combination of metals that can be hard to acquire. 

“It’s not just the manufacturing process, it’s that they don’t have the raw materials,” software engineer Alex Salerno said. “They can’t mine it as fast as they can produce and sell it.”

As technology has advanced over the years, cars, computers, and cellphones are no longer the only major consumer products requiring chips. Toothbrushes, speakers, and refrigerators have become “smart devices” which means they need them too.

“Now that we have more and more devices we are exponentially increasing the rate at which we are consuming devices, everything is smart now so everything needs a chip of some sort,” he said. “We are not increasing the way we are mining these minerals but we are also producing more of these chips, so everything is working against it.”

Salerno said this shortage would have happened even without the pandemic. 

“The shortage has been happening long before the pandemic, the pandemic just kind of sped it up a little. There was a shortage a year before the pandemic” he said. 

All of this hurts the consumers the most. Prices for several products like gaming consoles, phones, computers, and cars are going up. Some items are out of stock for months. 

Alan Priestley, an analyst at Gartner, told CNBC the average person will be impacted by the chip shortage. 

For instance, Sony’s PlayStation 5 has been sold out for months.

Seiji Maita has been trying to get his hands on it for a year and has seen them being resold online for almost double the price. 

“They went for like almost $1,000 when they came out last year,” he said. “It’s annoying because they just can’t fix the supply chain issue and people buy it to resell.”

The industry that has perhaps been impacted the most by this is the auto industry. Car manufacturers rely heavily on chips for everything from the computer management of engines to driver-assistance systems. Several companies, like Ford, Volkswagen, and Jaguar Land Rover, have laid off workers, cut down on vehicle production, and laid off workers, according to CNBC.

David Lewis is one lucky consumer who has benefited from the computer chip shortage. He resold his 2021 MacBook Mini to Apple a few months ago. 

“It was frictionless,” he said. “I brought it [into the store] without a box, and they booted it to make sure it worked.” 

His computer did work, and Apple gave him a $995 gift card in exchange. 

“I was surprised I’d get so much back for a used computer and they said their products were in high demand.”

So when will things get better? 

Intel’s chief executive, Pat Gelsinger, told BBC News the chip shortage will stretch into 2023. 

The shortage could last for a while, in part because of how long it takes to make the chips, how difficult it can be to get the materials, and because demand probably won’t slow down. 

It is important that anyone shopping for devices is flexible and understands it could take a while for items to be restocked. With that in mind, it is crucial consumers buy electronics they need that are in stock right away so they don’t spend months waiting. 

Consumers can turn their devices in at electronic stores, that way manufacturers can see if they can reuse some materials in their device.

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