CCSI makes electronic dog-washing booths that dispense shampoo, water and optional fur-drying. The machines are a hit with dog-park managers and the U.S. military, which buys them for use on its bases.
But the machines are controlled by computer chips, and recently, CCSI, which assembles the booths at its factory in Garden Prairie, Ill., was told by its circuit-board supplier that the usual chips weren’t available. A substitute chip would work, but CCSI would have to tweak its circuit boards.
That process has raised CCSI’s costs, bringing the frustrations of the same chip shortage that has idled auto factories around the world to a tiny town where the other main employers are a granary, a couple of bars and a part-time post office.
“This particular problem affects all aspects of manufacturing, from little people to big conglomerates,” said company president Russell Caldwell, whose father founded the business in the 1960s to sell lawn mowers. “Literally we have corn fields around us. . . . There’s not a lot here.”
Auto companies have been the most visible victims of the chip shortage, with Ford last week saying it expects to produce 1.1 million fewer vehicles this year than it had planned.
But in a testament to how dependent the world has become on the tiny silicon wafers, manufacturers of everything from video game consoles to household appliances are reporting problems. Apple said last week the supply pinch is hurting production of iPads and Mac computers and might cost it as much as $4 billion in sales, while Caterpillar warned of possible trouble ahead. Samsung said its sales of display panels are down because manufacturers who buy them for smartphones can’t get enough chips and have cut production.
Even railways are complaining that they have fewer autos to haul around.
The shortages threaten to act as a drag on the economy just as the post-pandemic recovery gets underway.
“When the chip supply tightens, the whole economy suffers,” says Glenn O’Donnell, a tech analyst at market-research firm Forrester.
Semiconductors are the brains behind most modern electronics, from computers and cellphones to smart toasters and washing machines. Cars, too, rely on dozens of semiconductors to operate dashboard displays, air bags and navigation systems.
Increasingly, however, semiconductors are enabling high-tech solutions to low-tech problems, such as vacuuming a carpet or cleaning a litter box. Chip-enabled lightbulbs and thermostats can be turned on and off over a WiFi connection. Pet owners can track their pooches with GPS-powered dog tags. Doorbells tell you someone is at the door, even if you are miles (or continents) away.
“Everything has chips in it now,” O’Donnell said. “We are instrumenting everything around us.”
When the pandemic hit last year, demand for many chips soared even further as white-collar workers snapped up computers and monitors for use at home, and leaned on cloud-computing centers to support a surge in Zoom and Microsoft Teams meetings.
Soaring demand and limited chip-manufacturing capacity worldwide means the shortages could last beyond 2022, until more semiconductor factories can be built, the chief executive of chip-making giant Intel said last month. The plants can cost more than $10 billion and take a few years to ramp up, a commitment that only a handful of companies worldwide have been willing to make.
Because of the steep cost, most chip manufacturers have focused their investment in recent years on factories that make the highest-tech, most expensive semiconductors. That has left lower-tech chips — the kind that run dog-washing booths, car parts and many other goods — in particularly short supply.
CCSI entered the dog-washing game about a decade ago, as a way to rustle up new business after the 2008 financial crisis. The company also manufacturers glass enclosures for carwashes, swimming pools and greenhouses.
“We are a manufacturing company of wet environment structures,” Caldwell said.
The strength of the pet market has made the dog booths a key growth-driver for CCSI. “A person takes their dog in there, they put the money in and the electronics of the circuit board operates the shampoo and counts the time and money,” Caldwell said.
A few weeks ago, CCSI’s circuit-board supplier checked in with a problem: It couldn’t source the semiconductors it had been attaching to the boards that operate the dog-washing booths. It was able to find a similar chip that would work, but because the replacement chip was bigger the circuit-board maker wasn’t sure it would fit inside the machinery.
Caldwell went to his factory with a tape measure and found that the new chip would fit, but the substitution has raised the company’s costs and is likely to delay deliveries of the new boards, he said.
Many manufacturers are in the same boat. Whirlpool has said a lack of chips and other supplies is leaving it unable to keep up with brisk demand for appliances. Chinese appliance companies have said the same.
Sony reports that the shortages are hurting its ability to meet demand for the PlayStation 5, and Chinese cellphone maker Xiaomi has said it may need to raise its prices to offset rising semiconductor costs. HP Inc., the computer company, forecasts that global demand for personal computers this year will be 45 percent higher than the company was expecting before the pandemic, leaving it struggling to buy enough chips.
Kansas City Southern, a railway operator, said that the idling of several auto plants in Mexico contributed to an 18 percent fall in the company’s auto-freight revenue in the first quarter. Union Pacific also reported an auto-freight slump.
Even some chip companies are suffering from the chip shortage. Innovium is a 200-person start-up in San Jose, Calif., that designs, but doesn’t manufacture, semiconductors for use in data centers. It contracts the manufacturing out to companies in Asia, which are so overloaded that Innovium has faced delays delivering its chips to customers, Chief Executive Rajiv Khemani said in interview.
“The government is certainly listening to a lot of large companies in terms of solutions,” Khemani said, pointing to a recent White House summit with automakers and other big businesses. “We think it’s important to include small companies like us because we are really driving innovation in Silicon Valley, and we are the growth engine of the economy.”
Erik Drown, a logistics specialist at electronics distributor Select Technology in Rowley, Mass., has been spending most of his waking hours in recent weeks trying to buy semiconductors for his automotive clients. Now manufacturers in other sectors — including some that make gas and water meters — are also requesting help, Drown said in an interview.
“This is spreading further than the automotive companies,” he said.
Drown is a middleman, contacting companies to try to buy any spare chips they have lying around, maybe because they overbought, or because they’re getting out of a particular business and no longer need them.
Counterfeiting is a problem. Select Technology tests the chips it sources before selling them onward and has come across a fair number of counterfeits, Drown said.
Another problem: chips sometimes get damaged in transit, from excess heat or rough handling. Roambee, a tech company in Santa Clara, Calif., is trying to help one large semiconductor manufacturer minimize this damage by monitoring its shipment crates as they move around the world. Roambee affixes sensors to the crates that transmit regular reports on temperature and other conditions.
But even this potential fix to the supply pinch depends on semiconductors — each sensor contains three or four chips that enable functions like GPS tracking, cellular communication and data processing, and costs for those parts have increased between 5 percent and 45 percent, the company’s chief executive, Sanjay Sharma, said in an interview.
Roambee has expanded its procurement team to try to buy enough components and is making substitutions where possible to use more readily available chips.
“It’s not a fun place to be in right now,” Sharma said.