This massive jump in demand has caused backlogs. Covid supply chain issues didn't help.
It would be nice to get to the bottom of these issues I keep hearing about. Yeah, COVID was/is a big thing but when it comes to feet on the ground, what's the impact? Not this much surely.
Not to be conspiratorial but is this a cover story we're being given? Why does it feel like there's suddenly this massive void in productivity?
/s.
Its global. Its everywhere. Every industry will have impact simply due to huge disruptions to everyone. Tons of people got died, and many more got sick, and subject to lockdowns, and saw their purchase patterns change (eg. toilet paper). Directly, the IC industry changed when people had to purchase laptops and monitors and webcams for their at-home employees. That is a huge surge in demand that was a 1-time thing, but all those office supply orders are still depressed, so anyone making things has to re-tool their factory.
So, what would you tell your customers, if you can't deliver on time?
To turn silicon crystals into a PS5 requires multiple steps in the supply chain which, when running smoothly, have multiple steps where people may be planning years in advance.
Sony builds their products out of dozens of components from different suppliers, which themselves may be made out of finished materials provided by other manufacturers, which in turn may be made out of chemicals or raw ingredients from other companies. The dependency tree is quite big, and if any of them are messed up, you can't finish your product.
Normally all of these dependencies are planned well in advance (quarters or years) so that everything is ready when the time comes to ship. Mess it up one level deep, and you're a quarter to a year behind. Mess it up two levels deep and you're two quarters to two years behind.
On top of this, semiconductor production was already stressed to its limits before COVID.
Yes, this much. I saw someone explain this well enough on reddit, but I can't find a link so I'll try and paraphrase it.
Let's say you're a lumbermill and you run at 100 boards a day in normal times, with enough capacity to do 110 boards a day if you stretch. COVID shut you down for 3 months. You now have a 9000 board deficit from your normal production, with people lined up to buy the boards before you've produced them. Once you get started again, you crank up capacity to 110/day - it takes you 900 days - almost 2.5 years - to recover that original shutdown deficit, without accounting for any of the increased demand for your product.
This is roughly what other industries are experiencing. "Why don't you just make a new factory to increase your production?" well, it would take a long time to do that, would take a lot of capital, the shortages impact you too, and there's no guarantee that once COVID passes, demand won't go back down to 100 boards/day leaving you with a huge unnecessary capacity.
A simple example, of course, but this kind of thing is happening in some form or another in most industries, and will just take some time to work itself out.
Just to tack onto it...
> Once you get started again, you crank up capacity to 110/day - it takes you 900 days - almost 2.5 years - to recover that original shutdown deficit, without accounting for any of the increased demand for your product.
This is best-case scenario. Likely is that a few % of your workforce will have been out sick with covid (or even passed away), and a few % of your workforce may have quit to care for family, or quit for better pay elsewhere, etc. So your "work extra hard to hit 110/day" is more likely "work extra hard to stay at 100% or even 90%". Especially limiting if you need to buy parts for your output that may be delayed due to others who are behind.
First, you had a massive lockdown in China in January 2020, which shut factories temporarily. Then when those factories came back online, the production lines had to be reconfigured so that stations were 2 meters apart. At the same time, a lot of the collaboration that typically happens by people from a company flying out to China to meet with the supplier face-to-face were shifting to video, which frequently met that at least one side of the call was early in the morning or late at night. And as all of that was happening, there were also large shifts in demand as some products saw spikes in orders. That pattern then repeated itself across the world - a company might move production from China to, say, Indonesia, only to see the new factory have to temporarily shut down.
I can imagine that two years of this would create major backlogs and disruptions.
A few months ago there were seventy billion dollars of goods anchored off of LAs docks alone. Some of those were finished goods, but some are intermediate goods.
It's so bad that it's cheaper to make new shipping containers in China than spend the time to return them once they've been used once. We have a glut of practically new containers clogging up our infrastructure.
Even as COVID stopped causing the direct backups, backups propagate all on their own. Like a giant traffic jam and you get to the front and the accident was cleared hours ago.