Chip Shortage: How Will It Affect the Holiday Shopping Season?

Chip Shortage: How Will It Affect the Holiday Shopping Season?

With about a month left in 2021, it seems like only yesterday the world was celebrating the end of 2020. The holiday shopping season is in full swing once again. But this year’s traditional shopping spree will be more of a mad dash than normal. The reasons? The ongoing chip shortage and supply chain issues. So far, industry experts are saying there’s still no foreseeable end to these issues—which will have a drastic effect on this year’s holiday shopping season.

 

Shortages, production bottlenecks, and congested ports have prevented many industries from restocking. Paying increased prices for components that are in everything from cars, TVs, to smart toilets is unavoidable. This has left many companies with little stock for the upcoming holidays.

With the end-of-year shopping season forecasted to grow in sales, no company wants to miss out. In turn, consumers will need to pay the inflated price for their desired items. That’s if there are products to buy at all.

Low Inventory from Prolonged Shortage

The semiconductor shortage has been an omnipresent force throughout most of the pandemic. Covid-19 shutdowns moved many employees from their offices and into their homes. Universities, private and public schools, all resorted to online learning. The need for computers, headsets, routers to even coffee makers increased the demand for semiconductors.

Bad weather, fires, and labor shortages contributed to the shutdown of these plants. Demand overcame the supply. Covid-19 did the most damage, stalling production and disrupting supply chains. Geopolitical tensions from trade wars and tariffs only unsettled the industry further. Without enough inventory, companies have had to face the danger of ceasing production head on. The other options? Limit the number of components needed or find another way around it.


Chip Shortage Affects Other Industries

The chip shortage affected dozens of industries because a majority of these products—everything from toys that have lights, make sounds, beep, to appliances, medical devices, and Peloton bikes and more—rely on these chips. One industry has been making headlines over the past year due to the lack of supply: the automotive sector. Many automotive companies, Stellantis, Volkswagen, and Ford among them, have removed features in newer vehicles in response. This includes lane-change assist technology, fuel management systems, and automatic chair adjustment among other features.

Consumer Reports recommends waiting to purchase a new car until these features are available again. Sam Abuelsamid, a research analyst reported that “total lost production volume could end up being more than 7.7 million vehicles.” The trade off for removing features is less chips required for production. Ending production entirely would mean losing more than the 30% of planned production already lost to chip shortages.

The automotive market isn’t the only sector feeling the heat. Leaders in dozens of industries have reported receiving 20%-40% less stock than what they order. Industry experts, Sage Chandler and Prabhat Agarwal, said that the largest organizations are still getting more chips than small competitors. Glen O’Donnell, Forrester’s research director, clarified that industries in the news are getting more attention from chipmakers. “If they [automotive industry] are getting chips, someone else is not.”

O’Donnell continued with an important warning. Chip-related disruptions continuing over the next 3-months, the toy industry “could end up being “THE” one “big news story of the holidays.”


Don’t Wait for Sales


Buying the latest gaming console or newest iPhone means many people are waiting in virtual queues. Experts are warning shoppers it might already be too late. Best Buy is offering a $200 service that boasts priority for in-demand electronics. It comes down to this piece of advice: don’t wait until Black Friday or sales. If you see it, buy it. Don’t wait for deals that might not come.

Sales will be a rare sight this holiday season. O’Donnell explained, “We’re seeing 5% to 10% price increases right now.” There has been a major jump in the price of computers, computer accessories, smartphones, and more. Consumers will have to “bear the financial brunt of the shortage.”

Even tech titans like Apple will be losing an estimated $6 billion this year in sales due to the shortage. This means longer wait times and higher prices for the iPhone 13. Nintendo is making 20% fewer consoles. The company even launched an “upgraded Switch to extend the life of the aging device.”  Microsoft and Sony have sold out of their newest consoles that debuted last year. They may not even be in supply until “some point” in 2022.

The Verdict

There will be an increase in e-commerce sales despite shortages and supply chain bottlenecks. According to Deloitte “sales will grow by 11-15%, year-over-year, during the 2021-2022 holiday season...reaching between $210 billion and $218 billion this season.” The shortage will still be in full force throughout these next months. The solution to this busy season – start early and don’t wait for lower prices.

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