SPRINGFIELD, Mo. (KY3) — Over the past two years, the microchip shortage that began when the pandemic hit has wreaked havoc on the automotive and tech industries. Now, as Russia’s invasion of Ukraine continues, it could lead to more supply chain issues and higher prices.
“That’s going to continue to be a problem,” says David Mitchell, professor of economics and director of the Office of Economic Research at Missouri State University. “Not only do you have Ukraine creating inert gases like neon and other things needed to produce chips, but you also have countries saying Russia is a no-fly zone. That increases the time it takes to get parts from one part of the world to another. It also increases costs, increases delays. It’s another stack on top of everything else.
Russia also provides around 30% of the world’s palladium supply, according to market research firm Techcet. Palladium is a key component in catalytic converters, which means a bigger blow for the auto industry. Mitchell says the full impact could take months for consumers to see.
“I don’t think it’ll be where you go to the store and there’s absolutely no computer,” says Mitchell. “You might not have as big of a selection of computers. And the car lot might not have as many cars as you would normally like to see. But, you’re basically going to see that reflected in higher prices .
Over the past few days, auto industry giants including GM and Volkswagen have announced that they will stop exporting vehicles to Russia. At first glance, this may seem to help with the supply of new vehicles. But, Mitchell says it’s not that simple.
“It’s not like you can take the car you want to sell in Russia and then turn around and sell it here,” says Mitchell. “I mean you could, but it’s not really geared towards the US market. So that will relieve a lot of pressure. Even if you could do it, it takes time to set up all this infrastructure. You can’t just flip a switch.
The same goes for microchips. There has been a push to increase chip production in the United States since the pandemic hit, and there have been some big announcements in this space. In June 2021, TSMC began building a chip manufacturing facility in Arizona. In November, Samsung announced plans to build a $17 million chip manufacturing facility in Texas. And in January, Intel announced similar plans for a factory in Ohio. But all of these facilities are years away from coming online.
“It’s one of the cool things about the just-in-time inventory system that started in the 80s and 90s. Parts arrived where they needed to be, sometimes days and hours after they were needed. So the fact that this system is no longer in place means you have to move to a system where you have inventories,” says Mitchell. “Doing this takes time to set up and, of course, increases costs and prices.”
So what should consumers do now?
“My suggestion would be if you could wait to buy these things right now, go ahead and wait,” Mitchell says. “Or maybe try to find a used computer or car. If that’s possible.
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