Tech buying likely to be costlier as COVID pushes IBM Chip shortage

A mass shortage of crucial computer chips used in everything from computers to cars is driving up inflation and is a direct result of the COVID-19 pandemic said IBM's president, Jim Whitehurst while speaking to the BBC on Friday.

"There's just a big lag between when a technology is developed and when [a fabrication plant] goes into the construction and when chips come out," Whitehurst told BBC World Business News.

He referred to the global spate of lockdowns that had caused many factories to close down even as demand for technology like laptops, consoles and smartphones soared as people began to work and study from home.

Whitehurst said that it would take a further two or more years for the industry to recover to pre-COVID levels of production. Reusing and extending the life of existing parts may also be a viable solution to the existing shortage, the IBM head opined.

The chip production crisis has also affected the global auto industry, with projected losses for the industry pushed up to $110bn from an earlier forecast of $61bn. The chip shortage has caused automakers globally to curtail production.

Last month, Ford said the issue would cost it $2.5bn this year and halve its vehicle production in the second quarter when the shortage would be at its worst. The shortage has forced Ford at times to idle production of its highly profitable F-150 pickup trucks.

The loss of production has pushed up prices. Around one-third of the shock 4.2% increase in US inflation, this week was down to higher car and truck prices.

"Inflationary pressures are building because of the reopening of the economy, supply chain issues and a global semiconductor shortage," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pennsylvania as quoted by the Guardian.

Other industries such as kitchen and household appliance manufacturers are also deeply affected by the lack of chips.