the global microchip shortage explained

Motherboard conductor

Following the pandemic, the semi-conductor shortage is the next great challenge for the manufacturing sector, and it doesn’t seem to be ending any time soon…

What’s the actual issue?

Semiconductors are an essential component of electronic devices found in everything from televisions and mobile phones to cars and games consoles. They are home to conducting properties of materials like silicon by using electric or magnetic fields to control the electric current flowing into a device.

Essentially, it’s the brain of the operation.

Why is there a shortage?

The ongoing shortage initially began as a result of the COVID-19 pandemic for a number of reasons.

Manufacturers across the world closed down, specifically vehicle manufacturers, leading to a drop in the requirement for semi-conductors, while remaining stock was used up rapidly because of the sharp increase in demand for PCs and gaming consoles during the global lockdowns.

Staff at semiconductor plants around the world were then also unable to go to work, so production halted and the plants were closed.

This lack of production continued for a lengthy period and then supply was further slowed by tighter restrictions at international borders.

Now, as restrictions begin to lift, those manufacturers that were previously closed have panic bought the already limited supply of semiconductors to keep up with consumer demand – across key sectors such as construction, engineering and vehicles of all types.

This has led to a shortage of semiconductors across the world and companies across a number of areas are trying to find ways of trading through the crisis – Peugeot has announced that its new 308 model will no longer feature a digital dashboard and Jaguar Land Rover temporarily closed two of its factories’ doors in April.

What happens next?

The impact of the microchip shortage is already being felt by businesses all over the world.

Lead times for cars, IT and machinery is expected to be from anywhere 6 to 18 months on top of old times and prices are already rising.

With the increase in demand, the only realistic solution is to increase the supply of semiconductors, and chip makers have already announced plans to scale up their manufacturing with new foundries opening across the United States and Europe.

But with each one taking 2-5 years to build, the problem won’t be going away any time soon.

To find out more about this story, email enquiries@maffinancegroup.co.uk, call 0115 958 6872 or fill in an enquiry form below.  

We arrange finance for a new Land Rover Defender…

Land rover defender

A longstanding customer came to us enquiring about financing a new 2020 Defender X P400.

 

The XP400 is the newest version of Land Rover’s 4×4 that first made its appearance in 1983, and the exact model that the customer wanted was a top specification costing £80,000.

As the customer wanted to put down a low deposit of 5%, we offered rates significantly lower than the dealership were offering. 

With the Defender planned to be used across the business, including farming, construction and recreational shooting, they wanted to finance the vehicle in the business name over five years and defer the VAT for 3 months – meaning they didn’t have to pay the VAT upfront.

We handled all dealership processes in-house and with low admin fees involved, the customer was happy to receive the car in time for their business re-opening after the pandemic.

To find out how we can help your business like we did here, email enquiries@maffinancegroup.co.uk, call 0115 958 6872 or fill in an enquiry form below.  

UK construction sales ‘not as bad as expected’ in 2020…

Access platform

UK sales in 2020 were ‘not as bad’ as construction equipment manufacturers and dealers feared, according to the latest Construction Equipment Association report.

Telehandler sales in the UK fell by 57.2% last year, and while plant sales also collapsed, the recovery surge in the latter part of 2020 meant that unit sales were down by 24.5% on 2019 – much less than was expected.

December 2020 unit sales were up on December 2019, with numbers being strong enough to put sales in Q4 1% above Q4 2019.

Because of the COVID-19 pandemic, the first half of the year saw the sector suffer a 38% decline in sales, putting the actual number of 24.5% into perspective, according to the report.

The most popular category was that of mini/midi excavators which was down just 5.5% year-on-year, again with Q4 sales being up on 2019.

MAF’s Director of Construction Asset Finance, Gary Burns, commented: “While the overall sales for 2020 have gone down, the latter part of the year certainly turned things around and is another positive signal that Construction in the UK is on its way back after the initial impact of the Pandemic.

“As one of the biggest employment sectors in the UK, this is a very encouraging sign and we have already seen this continue into January 2021.

“The Government’s CBILS scheme has undoubtedly been a factor, allowing companies to finance equipment in the knowledge that in lots of cases, the first year’s interest will be covered by the scheme.”

If your business needs help with a CBILS application, funding or the purchase of assets, we can help.

Call 0115 958 6872, email enquiries@maffinancegroup.co.uk or fill in an enquiry form here.

Construction industry makes surprising recovery to pre-pandemic output levels…

Tracked Excavator

The construction industry has made a surprising recovery to output levels last seen before the COVID-19 pandemic, according to the latest studies.

 

Led by infrastructure, new work activity in November rose by 3.5%, meaning the sector saw a 1.9% rise in month-on-month work, taking construction above pre-pandemic levels of output.

All new work sectors returned to growth apart from public new housing and public other new work, which fell by 2.4% and 2.8% respectively.

The strongest side of construction in November was infrastructure, which saw 9.6% month-on-month growth, followed by industrial at 3.8% and commercial at 0.2%.

MAF’s Director of Construction Asset Finance, Gary Burns, added: “It’s great to see the construction sector bucking the trend with continuous growth over the last seven months.

“To be at output figures similar to those seen pre-pandemic shows how adaptable the construction industry is in the UK.

“It’s also good to see that this is across the whole sector, from infrastructure to commercial.

“The confidence in the sector has been backed up by the decision to allow the sector remain open in the current lockdown – helping thousands of workers to continue to support their families and local economy.

Construction sites can stay open under new lockdown…

Construction finance header

Construction work is still allowed under both Scotland’s and England’s latest lockdown restrictions.

Prime Minister Boris Johnson unveiled new rules for England that included an instruction to “stay at home”. However, unlike during the restrictions last April, people are allowed to leave home to work in occupations including construction.

The new government guidance states that tradespeople are allowed to continue to work and should only go into a house to carry out or deliver essential work or services. This means that in both England and Scotland construction work is still allowed to operate as normal.

Both Prime Minister Johnson and First Minister Sturgeon have said that extremely clinically vulnerable people should not go to work but as most working sites like construction are Covid-19 secure and may continue to work.

The change in operations for construction comes after the Business Secretary, Alok Sharma , wrote an open letter to the industry about remaining open under the tightest lockdown restrictions.

With many other businesses having to close or reduce working hours, having construction and other working sites open will act as major contribution to the economy in tough times.

Director of Construction Asset Finance, Gary Burns, added:

“Allowing the Construction Sector to remain open and continue to work in a Covid Secure environment enables the ongoing projects to be completed and new ones started, allowing the continued growth in the UK construction and Infrastructure sector.”

“This will also give companies confidence to invest in new equipment to carry out these contracts and allow them to benefit from the CBILS schemes for funding”

You can contact us to chat through your financial situation on 0115 958 6872, email enquiries@maffinancegroup.co.uk or fill an enquiry form.

Our team is standing by to help businesses during this difficult time and are here to help you and take the strain off so you can focus on running your business.