Tag: chip shortages

OM in the News: The Memory-Chip Shortage

Memory is one of the tech world’s most ubiquitous and essential components that come in 2 major types. DRAM handles more fleeting, immediate tasks like using apps. The other kind, called NAND flash memory, provides long-term storage for photos, videos and other data. And there has been a 7-fold increase in contract prices for DRAM and NAND flash in the past year.

Facing soaring memory-chip prices, the world’s biggest electronics companies are staring at a list of unpalatable responses:(1) charging consumers more, (2) eating the costs or (3) rejiggering product specs. Such is the supply-chain disruption wrought by the global drive into AI, which requires fleets of data centers with servers needing gargantuan amounts of memory, reports The Wall Street Journal (Feb. 13, 2026). 

The memory crunch comes at an inopportune time for companies like Nintendo.

That has caused supply to dry up for the makers of smartphones, PCs, gaming consoles and various other electronic gadgets, and triggered a historic price uptick since early last year that is higher than any increase seen before.

Dell has raised prices for some commercial laptops by as much as 30%, while budget PCs from rival Acer now carry several gigabytes less of multitasking memory. Chinese smartphone maker Xiaomi recently discontinued the lower-memory variant of its new midtier device and raised prices. To summarize: A tough year for smartphones, PCs and game consoles is getting worse. Projected shipment declines are now stumbling deeper. PCs, with memory representing as much as 30% of their total costs, are particularly vulnerable.

With investments into AI infrastructure remaining hot, the prospects of memory prices falling soon don’t appear high. Supply is expected to remain tight through 2028.

Classroom discussion questions:

  1. What is the underlying issue?
  2. What can manufacturers of PCs, smartphones, and game consoles do to protect themselves?

 

OM in the News: Chip Shortages are Still Hurting Auto Makers

Auto makers globally have been grappling with a shortage of semiconductors since late 2020, when a rebound in auto sales took companies by surprise after they had previously moved to reduce chip orders. Auto makers competed for limited supply against electronics companies like Apple and Dell that saw demand bolstered by stay-at-home consumers.

That demand has now eased, and smartphone sales are falling. The car market, meanwhile, has remained relatively strong and Toyota, the world’s biggest auto maker, says it still can’t get its hands on enough chips. Toyota is trimming this year’s production by 500,000 vehicles because of the shortage.

The situation reflects prolonged underinvestment in certain older types of chips that are particularly needed by car makers, writes The Wall Street Journal (Nov. 2, 2022). While slowing demand for smartphones and personal computers has eased shortages of memory and other chips and sparked fears of a glut, pockets of constrained supply remain. Analysts and chip executives say the supply-demand mismatch could drag on for years, that the auto industry isn’t yet near the end of its problems, and some might even worsen.

The problems particularly involve analog chips, which use older technology processing information with gradations, unlike digital chips that differentiate only between on and off signals. Other auto makers beside Toyota have also said they are grappling with a tight supply of legacy chips. Cars use hundreds of analog semiconductors for purposes such as moderating how much power is drawn from a battery, yet new investment has largely been funneled into developing more advanced chips.

Due to the nature of vehicles today, even if it’s just one type of semiconductor that’s in short supply, a car can’t be built. Toyota said it would temporarily give buyers of some models in Japan one smart key instead of two to help ration supplies.

Classroom discussion questions:

  1. What options do auto industry operations managers have when faced with a chip shortage?
  2. Why is there still a semiconductor shortage?