Semiconductor Supply Shortages and Price Hikes Hitting Electrical Contractors

Published On
Apr 19, 2021

There has been plenty of news in recent months about the severe shortages and price hikes associated with lumber that have been making it difficult for homebuilders to get the lumber they need, and at reasonable prices. The lumber shortage, of course, not only affects homebuilders, but also the electrical contractors that rely on subcontracting work with homebuilders.

However, there are other shortages and price hikes affecting electrical contractors more directly. One of these is the shortage of semiconductor chips. Months ago, the shortages were considered temporary delays resulting from semiconductor factories having to shut down when the pandemic first hit. These days, however, even though more factories are increasing their production, the shortages tend to be related to significantly increased demand for the chips from businesses that provide products to businesses and consumers.

While lead times reached their peak in mid-2018 (with an average of 14 weeks) and were at 12 weeks in February 2020 (just prior to the pandemic), they are now around 22 weeks.

Of even greater concern is that the chip shortage is expected to persist for some time, as it may take up to two years to get these complex semiconductor production factories back up to full production. In addition, given the increasing demand and chip shortages, manufacturers are again raising their prices.

“Manufacturers around the globe are scrambling to secure supplies of semiconductors that are essential to everything from smartphones to cars,” according to an article in Bloomberg.

The shortages are causing price increases in many tools and other equipment that electrical contractors use on a regular basis. In addition, they are hitting other specific projects on which many electrical contractors work. One of these, for example, is cellphone tower construction.

Solar projects are also being impacted. Here, the chip shortage is affecting the availability and price of microinverter systems, which convert solar power from direct to alternating current.

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