A password will be e-mailed to you.

Big Tech Companies and Their Earnings Hit by Supply Chain and Chip Shortage Issues

The coronavirus spread at an alarming pace in 2020. Naturally, governments and businesses everywhere were concerned about the welfare of their citizens and employees, respectively. Countries initiated shutdowns of various industries, leading to a decreased demand for goods and services. 

Now that the worst of the pandemic appears to be over, policymakers and businesses have reversed lockdowns, and consumer demand has risen rapidly. 

Reports of record-breaking highs have come in from all over the globe. For instance, port authorities in the U.S. have noted that they have moved more cargo in August 2021 than in any other year. 

The end of the lockdowns, mainly precipitated by successful vaccination programs, has also brought with it supply chain problems. In the thick of the pandemic, coronavirus protection measures caused a great deal of disruption to global supply chains. 

The supply chain represents the sequence of the movement of goods from their production point to their final destination – be it a supermarket or a customer’s home. Global supply chains are crucial to economic wellbeing. They help reduce costs, and they urge companies on to productive, healthy competition and innovations. 

Organizations in various countries and sectors, ranging from agriculture to technology, have been affected by supply chain disruptions. For instance, supply chain issues plague the U.K.’s economy. This article explores the effects of supply chain disruption in the UK, as well as other uncertainties such as problems in the labour market and inflationary concerns. 

A part of the supply chain includes labour, an issue with which the U.S. is currently struggling. Though companies in the U.S. have managed to receive their inventory in good order, they are experiencing a severe lack of skilled workers to help deliver the goods to their final destinations.  

The U.K. has similar employment problems. The 2016 decision to leave the European Union has vastly magnified these challenges. Labour shortages in crucial sectors of the economy hamper the delivery of fuel and food. The skilled labourers needed to address the British supply chain issue are experienced truck drivers who can move heavy goods from point A to point B. 

However, the unlucky combination of Brexit and the pandemic has made it difficult for British businesses to attract the talent they need to fix their supply chain challenges. 

For Big Tech companies, the pandemic has not brought such positive outcomes either. The lack of semiconductors has been an issue since the beginning of the year. COVID-19 demonstrated just how delicate the logistics are when it comes to ferrying chips from one locale to another. The supply chain for semiconductors simply could not respond timeously to rapid, unexpected fluctuations in industry demand. 

Another issue particular to the supply of semiconductors around the world is the fact that nearly three-quarters of semiconductor manufacturing is done in Asia. Interestingly, this current situation of dependency on Asia could have been avoided. Apple approached Intel in the early 2000s with a proposal to provide semiconductor chips for their new product, the iPhone. Intel did not see the value in such an endeavour, which led Steve Jobs to comb through Asia for a suitable partner. That is when Apple found the Taiwan Semiconductor Manufacturing Company, a superior chip manufacturing organization, delivering chips that perform 30% better than any produced by Intel. 

Global supply chains have also caused rates of inflation in the U.K. to reach worrying levels. Gross Domestic Product for the nation is directly hampered by this trend, meaning that the much-hoped-for recovery will not be as swift and robust as expected. 

In the short term, there are concerns about how consumers will spend the upcoming holidays. As Big Tech companies struggle to adjust to the impacts of disruptions in the supply chain, families will have to deal with the unpleasant fallout – a huge delay in getting presents to their loved ones. 

Warnings have been issued from experts in the U.K. highlighting the fact that fuel shortages will have knock-on effects on the supply of food and other products in the retail sector. Namely, these items will become scarce, making it unlikely that receiving physical gifts will play a major role in many people’s Christmas get-togethers this year. 

The pandemic has shed light on just how interdependent the world is. Without fuel, companies cannot get their stock. Without stock, there is little for businesses to sell to consumers. Inflation inevitably occurs as organizations attempt to pass on the cost of inventory shortage to their customers in the form of price hikes. Lower consumer demand ensues, followed by mild stagnation and a host of ill effects on entire economies. 

Analysts are not optimistic about the mid-to-long-term prospects of global industries. Big Tech companies are likely to fare well because of lockdowns and other work-from-home measures. These policies have increased demand for their products, making it possible for them to continue selling, and to continue hiring people to work for them. Smaller businesses, however, are likely to feel the strain of the supply chain struggles more keenly. 

The more optimistic analysts are saying that the supply chain issues will be resolved by the middle of 2022. Invesco chief global market strategist, Kristina Hooper observed that the semiconductor chip shortage is very likely to be resolved by 2022’s second quarter.

The less hopeful analysts – some would call them more realistic – have indicated that the troubles with global supply chains will most likely last well into 2023. 

Comments

comments

No more articles
Send this to a friend