Insights

Growing Your Business In A Chip Shortage

The global Chip shortage is effecting more than car production, it’s effecting everything. See why dropshipping is at risk and where the future lies for consumer electronics and online entrepreneurs.

Many of you are aware of the global chip shortage we are currently experiencing. Most of you may know about its effects on the car industry, but the truth is, anything electronic – cars, smartphones, toys – is feeling this burden.

And unfortunately, small business owners and online entrepreneurs are starting to feel the effect of the chip shortage as well. Here are the trends we are currently seeing and a forecast of when relief will be in sight.

Scenario

Prior to the COVID-19 pandemic, the Internet of Things (IoT) was taking off and straining the production of semi-conductors for microchip production. When COVID hit, the line of production broke.

Although Elon Musk has recently called the chip shortage a “short term problem,” things aren’t going to clear up overnight. The problem the world is facing is a lack of semiconductor factories. Yes, there are plans throughout the United States and China to build more factories, but that will take time and a lot of money.

According to What It Means, it takes approximately two years and about $10-20 billion (US dollars) to build a new factory. We broke ground in 2021 and expect these plants to come into use in 2023, with the first batch of semiconductors rolling out three months afterwards. Yes, it takes about three months to produce a batch of semiconductors.

Changes Coming for Online Entrepreneurs

The first major change to expect is that demand will increase prices and wait times longer for chips. The more influential companies, and especially those with government backing, will take priority on receiving the largest batch of chips.

Dropshipping

Dropshipping electronics or other items with chips will face the greatest challenges in the next two years. There are two things to be wary of in the dropshipping scene.

  1. A delay in production and shipping fulfillment.
  2. A warning to not hoard products.

Those long delays in getting chips will ultimately lead to your customers having long wait times or cancelling their orders if you are dropshipping. This is a warning to go ahead and change your business model, at least in the short run, for electronics or with any other item that you may encounter shortages.

For those considering hoarding products with chips, think again. The US FBI has already started looking into potential boarding situations that are driving up costs. You do not wanna be caught up in that situation.

Opportunities

With every bad situation comes new opportunities. The biggest opportunity for online entrepreneurs will be in the refurbishment of electronic equipment in America.

There’s no denying that there is a large margin on reselling refurbished electronics. For those able to completely repair damaged phones, computers and other consumer electronics, you will see the greatest profit.

However, if you’re unable to repair goods, you still have the option of partnering with a refurbisher, offering them your marketing infrastructure to accommodate their skill set.

There’s also the option of selling parts for previous metal recycling. Companies like Specialty Metals offer services to extract and recycle precious metals found in CPUs and other electronic components. These are made from gold, platinum, tin, cobalt, tantalum, copper, etc. For a full list, check out this source.

Forecast of Chip Manufacturing

The Internet of Things forecast will shift to slowed growth while we work to open multiple new factories. Additionally, those doing drop shipping will need to be cautious about the products they select.

By mid 2023-2024, we should see noticeable improvements in chip manufacturing for consumer products. At that time, we should expect a larger variety of electronic consumer products that will be affordable for small business and online entrepreneurs.

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