For a few weeks now, the chip crisis has become one of those stories that is always present in the media that talk about technology and also in the economic pages of newspapers of all sizes and of all fields. After all, what seemed to be a specific problem for some tech companies at first, has turned into something with effects in many other niches and in many other areas. For example, it is already affecting car production and forcing shifts to close in factories that some brands have in Spain.
The issue started out as a manufacturing and logistics nightmare, but it is having a cascading effect on countless other areas of companies. So much so, in fact, that it could powerfully affect major consumer milestones of the year (for example, Black Friday) but it should also already be among the topics that marketers should take into account.
What exactly has happened and why has the semiconductor crisis, something so gray and with so little common headline, become something with such impact? You could say that a kind of perfect storm has been created. Before the outbreak of the pandemic, you could already find a headline from time to time on ‘the question of semiconductors’, but the year of the coronavirus has made it a serious problem. During the peak months of the crisis, there was a change in demand.
Car manufacturers and the aeronautical industry put the brakes on their production, which also stopped the production of chips for those sectors and gave priority to others. The chips were mainly destined for consumer electronics, which was growing overwhelmingly due to the needs of both telecommuting and home entertainment.
These weren’t the only items. The expansion of 5G has increased the demand for chips and has caused manufacturers to respond to a new need. All of this also happened while manufacturing plants also had to apply their own restrictions for safety and covid prevention reasons.
The situation dragged on during 2020 and has exploded during 2021, when the pressure on manufacturers has increased as activity in some sectors resumed. What was a niche problem, something closely related to how things are done, has turned into a nightmare that drags companies of all kinds.
Gartner has just made an estimate of when the semiconductor market will return to normal and has determined that it will not be immediately. The shortage will continue until the second quarter of 2022. Although some manufacturing companies have announced that they are opening new plants and reinforcing production, the effects of these actions still take some time to show results.
Why it’s a problem for marketers
And all of this can become a serious problem for marketers, in many industries directly and in others indirectly. Those who have to manage the presence of affected companies in a direct way, such as technology companies, will have to navigate rough waters.
Possibly they will be dragged into product shortage problems and consumer complaints for it. You just have to think about the PlayStation 5 case: Sony’s star console has become a precious and very rare commodity and will continue to be until 2022 according to the company’s own projections, due to semiconductor supply problems. Nintendo or Microsoft have also warned about potential problems to meet the demand for their consoles.
This is not the only potential problem. Many companies affected by the situation will be forced to raise the prices of their products, which will cause consumers to view them in a negative light.
Similarly, marketers of companies who suffer all this directly will have to weather with reputational problems.
A chip hits on Black Friday
But those companies that operate in other areas will not get out of all this without problems. The chip crisis is turning into a kind of game of dominoes that is tossing one after the other. You just have to think, for example, what can mean that consumers cannot buy new mobiles or new tablets.
As one analyst explains to Protocol, “it is going to affect practically everything.” Although right now it is still possible to buy many products, experts believe that problems will begin to be seen in the second half of the year. For example, this is possibly what happens with stickers for streaming or smart speakers.
The second half of the year is the period of large purchases and this type of product of the most desired. If they don’t start to run low, they may have to go up in price, because the chips will have and the cost of the product will have gone up. Making big aggressive discounts on Black Friday will therefore be impossible.
And although Protocol’s analysis focuses on what will happen to these two specific products, the truth is that its conclusions can be extrapolated to many of the products that act as engines of attraction for these offers. Consumer electronics will not be able to star in large and aggressive sales if their stock is limited and their costs have skyrocketed.