How a global microchip shortage will impact Canberra Christmas shopping

It isn't because Santa's elves got there first, but because of a global microchip shortage.

Founder of IT services provider All IT Solutions Anthony Cataldo said the microchip shortage had affected everything in his company, "from computers to wireless access points, WiFi, routers, switches."

Prices from distributors have risen, and a lot of stock is not available.

"We're not able to get on top of our business and progress with certain projects or progress with certain orders or that kind of thing because we're being delayed," he said.

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Semiconductors are used in a plethora of industries.

Goldman Sachs identified 169 impacted industries, including manufacturing for cars, flat-screen TVs, lawnmowers, dishwashers, phones, aircraft, audio equipment and more.

David Leaney, ANU convener for international supply chain management, said microchips were used in items throughout an everyday house.

"Most people don't realise how many ordinary devices have a microchip in them," he said.

"Look around your kitchen or laundry and count them. Anything with a clock or timer or sensor in it has a microchip. Or better still, have a think about your car and count the number in your car (including the engine management system)."

This means things as diverse as gaming consoles, hybrid cars and PCs are getting harder to find. Prices are also rising.

Canberra resident Belinda Makrides has been dreaming of a Toyota hybrid car for years. The microchip shortage means she will have to dream a lot longer.

The automotive industry has been particularly hard hit, with the value of many vehicles appreciating as people desperately try and source second-hand cars.

ABS inflation data showed motor vehicles rose 11.51 per cent in price in the 12 months up to September this year. This was especially high for cars because they generally have not kept up with inflation.

Australian Automotive Dealer Association chief executive James Voortman said the shortage had affected "almost every market including Australia, and it's affected almost every brand of vehicle."

"When the pandemic struck ... a lot of those automotive manufacturers thought that they wouldn't be selling many cars, so they cut back on production," he said.

"As a result, the microchip manufacturers started preferencing other suppliers such as the makers of gaming consoles, washing machines, and all of those other electronic products."

A lot of technology will cost more for a while, ANU Professor Meijun Qian said.

"Usually, when this new technology comes out, the older model gets much cheaper," she said.

"[Now] when the new model comes out with much less supply, it means the older model's price is not going to depreciate as much as before."

This means not only will the new models - of which there will be fewer available - be more expensive, but the older models will as well.

"I think for the new product, the price is going to have to be much higher for the next several years, not only because of the shortage of supply, but also the new technology is more demanding in manufacturing. The [price of the] microchip itself is going to go up as well," Dr Qian said.

Mr Cataldo said in addition to higher prices, consumers would have to be a lot more flexible with purchases. Expensive stock was more likely to be available.

"There are machines out there, they're just not the machines that you might necessarily want or need," he said.

Mr Learney said the problem had been caused by limited supply for demand and "lots of problems with distribution". When the COVID-19 pandemic hit, manufacturing of the chips stalled.

They are expensive to manufacture without bulk.

"Making one chip by itself would cost millions, so you need to make tens of millions at a time to make them cheap," Mr Learney said.

Dr Qian said there was not a large inventory of microchips because they needed to change quickly in line with technological advances. Some industries halted their manufacturing and failed to make orders of the microchips, predicting a drastic drop in demand for products that did not eventuate. However, technology and IT suppliers experienced greater demand for certain products when people started working from home.

Much like the toilet paper fiasco, some companies started to stockpile chips once they realised supplies were low, further exacerbating the situation.

Opinions vary on when prices will plateau.

Dr Qian said it would take one or two years for supply to go back to normal, with prices to remain higher for years. She said manufacturers would also need to adapt to the newer technologies that will be coming out in the next few years as well as produce enough microchips for current models.

Mr Learney predicted the supply issue would be resolved in early 2023 at the earliest.

"It will take many months for the workforce and production capacity to get back to normal around the world, and many more months for the distribution problems to smooth out," he said.

Both Mr Voortman and Mr Cataldo said they expected distribution issues to ease in about six months.

Most consumers will need to be very flexible about the models they want. Lower-priced items were harder to come by, Mr Cataldo said.

He said businesses in particular would have to bite the bullet and pay.

"If I need a new machine, I need a new machine. If I could have bought one a year-and-a-half ago for $1500, but now I got to spend $1800, well so be it. That's what I've got to do. I've got to get the job done," he said.

For those looking for a car of a specific car model, Mr Voortman advised putting yourself in the queue and get ready for a long wait.

"Everyone has to wait for a very long time. And the longer you put off your decision, the longer the queue is going to get," he said.

Mr Cataldo said Canberrans looking for Christmas gifts would need to be very flexible, consider older models, and consider secondhand items.

"Not even our distributors know when they're getting stock. I mean, it almost just appears on the doorstep one day, and then it all goes out," he said.

Correction: An earlier version of this article incorrectly attributed the statement to Professor Qian that there were only two main manufacturers of semiconductors, Intel Corp and AMD. Intel and AMD are the two main types of chips.

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