Here's Why the Chip Shortage Will Get Worse Before It Gets Better

Last week in my newsletter, I shared that prices and lead times were increasing due to global shortages. Over the weekend, I came across this article that explains the state of play:

These supply chain woes began in the early days of the Covid-19 pandemic, when lockdowns worldwide shuttered manufacturing plants, disrupting the supply of semiconductors while simultaneously driving a surge in demand for devices like laptops and gaming consoles. Sensing an economic slowdown, many car companies jumped off the line for chips. Semiconductors can take up to six months to make, so when automakers canceled their orders, consumer tech companies were able to swoop in and buy those chips. When car demand returned and automakers needed semiconductors again, there weren’t enough to go around.

As a reminder, since most architectural lighting today is based on solid state LEDs, the lighting industry is as much at the mercy of the chip shortage as the electronics and auto industries. You might be thinking, “but you don’t need advanced chips for lighting…” (That’s what I thought.)

Turns out simple chips are also an issue:

…they also need simple semiconductors, too. And right now, it’s these basic chips that are in the shortest supply. This category of components includes “commodity chips that do these mundane things like display drivers or timers or microcontrollers or power management chips,” Shih, the Harvard professor, told Recode.