Toys have become part of many children’s daily routines. Especially at the onset of the pandemic. In recent times, STEM-related ones are in high demand. This is due to their educational benefits. Aside from the increase in the cost of toy production, which affects the price. The global chip shortage is also contributory to the increase in the price of some toys.
What is the global chip shortage about?
In the production of electronic devices like computers, gaming devices, electronic toys, etc.
Some elements can conduct electricity known as Chips or semiconductors.
Chips are what producers use to enhance the performance of electronic devices. In recent times, there has been a global decrease in the availability of these chips. As gadgets and game demands are high for adults, so is a toy for kids. While they are a few reasons why toy prices have gone up, the global chip shortage is key. Especially for toys that need materials to conduct electricity.
Ardent buyers of toys ranging from wholesalers, who buy in large quantities to others. Even retailers who sell to parents are making inquiries about the change in toy prices. Especially the electronic toys.
The issue is: Why does the global chip shortage affect toy price?
The global chip shortage affects toy prices because most electronic toys need chips. Chips or semiconductors aids to conduct electricity. It enhances the performance of the toy. The recent decrease in chip circulation is affecting the full productivity of toys. Aside from the chip shortage, the prices of the chips in circulation are insufficient. Hence, the effect on toy price.
At the beginning of the COVID-19 pandemic, there was an unusual increase in the demand for gadgets. These devices range from laptops to smartphones. Also, toys of different types(especially STEM toys) were in need. The regular use of these devices increased the need for chips.
Aside from the chips not being available, the production of electronic devices paused. As they need chips to work. Prices of toys are changing as the little chips cannot maximize production. For most STEM toys to perform well, there is a need for adequate chips during production. Now, toy production has these effects. It is now among industries across the world, who are facing global chip shortages.
How Severe is the Chip Shortage to Toy Production/price?
Even though a toy looks playful, it takes several components to manufacture it. The electronic ones are more demanding due to the electrical aspects of production.
The Global shortage of chips has cost a lot to electronic companies. A lot of electronic companies have shared these impacts. For instance, big tech companies think the world is going through a serious imbalance. Especially in the production and circulation of chips globally.
Unfortunately, the shortage is so bad, the US President, Joe Biden promised to look into it. Because it has affected the manufacturing of new models of tech products. Also, it hit the circulation of old devices, including toys. Thereby, making the usual prices of these commodities change.
Furthermore, the global chip shortage has affected toy makers. It has caused toymakers, auto manufacturers, and giants to reduce production. Even in the US, the state of things has alarmed members of Congress including the White House.
The Recent Toy Market
Whether you are trying to buy a recent gadget or electronic device, beware. You must have noticed the increase in the price of these items. Also, if you are a regular toy shopper, or you have kids who are ardent toy users. You must have noticed that there is little price change in toys and more in electronic toys.
This is so because there is yet to be a massive improvement in chip circulation.
What is Causing Global Chip Shortage?
Since we have known what chip shortage is, let’s dive into the main causes of chip shortage globally.
According to business times, there is over a 12% decrease in the tech market. Within the production of electronic gadgets that need chips. It can also cause a further decrease in the production of things that need chips. Including electronics, ranging from smart devices to Toys.
In basic terms, few factors are crucial to the global chip shortage. The factors range from the intensifying use of tech devices and toys. With limited availability of chips to meet the demand. in similar terms, the shortage of chips can be of two causes, which are
- Physical chip shortage
- Economic chip shortage.
Chip users globally.
While mismanagement of available chips in the market is the 2nd cause. Although, there are various causes of chip shortage, let’s examine them below:
Stocking
Companies that had prior knowledge of the issue jumped in. They noticed a decrease in production and circulation of chips and began stockpiling. Also, the number of chip producers is not much, all over the world. That’s the reason why the biggest producers have executives to look into the market. Taiwan Semiconductor Manufacturing Company, Limited (TSMC) conducted an analysis.
Here are their findings:
- Some customers were demanding more supply. So they can build up and stock in case of scarcity.
- In the first quarter of 2020, A few PC producers were in the know about a very limited supply of chips.
- During the mid-year of 2020, some companies started accumulating materials. E.g tech giants like Huawei.
Along the line, other tech-related companies followed suit. This made the demand very high but only a few could go round.
Weather
Even though Samsung called back within a short period. The power outage that occurred in Texas is a factor. As chip plants are surrounding Austin. The weather was extreme and shut down semiconductor plants.
Pandemic
While trade wars, drought, and fires are affecting the chip market. The global pandemic is a major key player.
So many devices need chips, and at the peak of semiconductor markets picking up, Covid-19 came. The pandemic halted the increase in supply. As producers could not make enough due to lockdown.
While there was a lockdown extension, there was a big slump in gadget sales including toys. During the lockdown, there was a need for educational toys and gadgets. These toys need chips before production, which is in high demand by manufacturers. These factors halted a big supply of chips. As electronic STEM toys contain chips to control their functions.
5G Technology
Devices that enable 5G usage contain chips. There is a need for chips to build their operating Power. Also, managing the 5G modem, and regulating the display. As the demand for 5G enabled device is higher. The chip industry is not funded enough to meet these demands.
This outlook means that there will be a limit to the continuous supply of chips.
Market Demand
As far as there is an unusual need for electronic devices and electronic toys. The chip shortage will linger for an extended period.
The crucial transition for workers to operate from home is a contributing factor. The need for home office begets the need for electronic devices and toys. Which in turn piles up the need for huge chips supply in the market.
What Kind of Toys Need Chips?
Plain rubber toys are not the only toys there are, the toy market is huge and several toy varieties are in the market. Detoo toys have them in different categories. Ranging from science toys, solar toys, robot toys, electronic toys, DIY circuits toys to DIY wooden toys.
So for many parents who inquire on why the prices of toys change. The chips used in making some of them are not always available.
So what kind of toys need chips since prices change?
Toys that need chips are electronic DIY kits, Robot toys, electronic playthings, etc.
For Robot toys, there are components required. To make artificial intelligence function, it needs a chip. The things that fascinate kids in robot toys need chips during production. That is why there is a price hike with limited circulation in the market.
Even though robot toys have gained fame, people still love them. The increase in its demand is high because of its educational values. As tasking as it can be to gift kids, robot toys never go out of fashion. And kids are always in need of it. While the lockdown lingered, toys became essential commodities with educational merits.
Electronic Toys
Aside from robot toys, other plain electronic toys need chips to function. From time immemorial, electronic toys have always been a thing that engages children. Especially toddlers to infants.
It appeals to their sense of hearing and makes programmed sounds till the batteries die. The ones built for creativity contain few buttons. They help create social activeness and add educational values.
The shortage of chips limits the supply and change in the price of electronic toys.
DIY electronic Kits
Before, electronic devices came, kids prefer plain DIY block kits to play with. While other industries are evolving, toys have evolved and upgraded. Likewise, kids have grown to have better tastes. Including high expectations when it comes to gifting. A few toy producers have noted and applied new technologies in the production of toys. Exceptional ones from Detoo toys create imaginative playtime.
The production process of DIY electronic toys is complex. It requires adequate chips to aid better performance. The stylish designs and functional sounds it makes is stylish. They are due to the chip used in the production process.
The Issue: it is pertinent to note that this chip shortage is global. Not only affecting other industries but toy market also.
It affects toy prices because there is a limit on-chip circulation.
How to Gain From The Shortage?
Even though there have been no chips to produce electronic devices. There is still room to make a profit from this global challenge.
In every economic scarcity, some people make a good fortune out of it. Here are a few legitimate ways to gain from the global chip shortage:
Foresight:
For the success of most endeavors, this skill is very useful.
For instance, Mr.Jiang, an IC supplier earlier watched the chip market and its circulation. After noting the differences in circulation, demand, and supply. He stocked up chips at the onset of chip shortage. For each price hike the chip market makes, he makes double of it. Due to his earlier market analysis/foresight.
Foresight inspires action. It triggers ideas and resources to make change happen in any business. Once there is a high demand for a commodity, it alters the supply thereby affecting the market price.
Planning
Effective planning breeds large productivity. While taking stock of how to market commodities are doing, a creative plan should be in place. Since there has been a global chip shortage. And there have also been speculations of it lingering for an extended time. It is necessary to plan by the present status quo and future outcomes.
Whether the global chip shortage is going away soon or not, it is not out of place to buy anyone that comes within reach. This is because the need for chips is regular and cannot go out of demand. As far as there is a need for electronic devices, chips have come to stay.
With the chip shortage globally, now is the right time to plan. It will help reduce uncertainties that are hard to predict. Also, if you are into electronic device production, note this:
The insecurities and obstacles for further productions will be minimal. About the unpredictable turn out of events:
Planning will keep your company under control, even if the chip shortage lingers.
Also, planning maximizes your operation with available chips. Despite the global chip shortage, you will win. When you plan with available resources, you produce orderly and purposeful results. It will remove all types of wastage during the production of electronic devices. Also, the cost of manufacturing toys and devices that need chips will be small.
Investing in Semiconductor Stocks
While chip suppliers are also watching how the chip shortage is going. It is reasonable to consider investing in chip stocks. After all, every investment affects the long-term and short-term growth of an economy. The future of chip shortage is not yet sorted. But, researching and investing in any of the recent chip stocks is ideal.
The need for technology improvements is huge. The demand for electronic devices has come to stay. Also, these demands are not disappearing in the future. Meaning: producers will need more chips. You can research and learn the ones that are profitable before investing. A few new ones are taking over the market unlike when chip production went down to two companies. Researching profitable stocks is the way to go.
How Long Will the Global Chip Shortage Last?
From the start of the chip shortage all through the pandemic to the point when lockdown is at ease. There has not been any official stated time frame for the elapses of chip shortage.
While there are speculations of it to improve by 2023, it is not yet certain. But, here are a few findings from our research:
- Intel invested $20 billion in building two dedicated factories for chips.
Intel recently announced this plan as a strategy to curb this shortage. It intends to produce chips designed by other organizations too, as long as numbers add, it’s a big win. Although, the execution of this project and market boom will take a while as these things need time to pick up.
- Intel gave a time frame of six to nine months to start rolling out produced ones into the market.
In good time, it will meet a high percentage of supply to chip users. For now, electronic device producers, toy producers have limited chips to work with.
- Short Term Fixes Will Soon be on Roll Out
According to Pat Gelsinger, there are a lot of short-term fixes in place. This is to reduce the shortage, but it will not curb it. This is because most long-term fixes will take years to manifest.
Are they worth it?
Well, yes! The chip shortage has affected manufacturers so much that it’s affecting consumers too. Putting up a quick fix is ideal. But, it should remain so to put long-term fixes in place. Although, it may take years for long-term fixes to come through. It should remain pertinent and put in place.
- The Government Can’t do Anything to Change the Situation at the Moment
This is due to the cause of the situation that contributed to the chip shortage. At the onset of the pandemic, every business and company was down. No operation, no delivery, and no production. But, while this was on, the demand for computers, electric toys etc, was high. As demands were high, there were no plans to increase supply except as soon as lockdown eased.
All things considered, bit by bit investment into chip stocks may not curb the shortage. But it will make a difference in the chip markets.
Judging from chip suppliers and producer’s outlook. It is safe to say the chip shortage will last till 2023. Although with positive results in the coming months. There might be slight changes, especially in electronic devices.
Great content! Keep up the good work!