Chip shortage affects ag industry — and, no, it’s not the potato kind

WESTFIELD, Ind. — The agriculture industry has suffered on many different fronts since the beginning of the COVID-19 pandemic, yet there is another issue now impacting business — a worldwide shortage of microchips.

Travis Jones, the CEO for LHP Telematics, an industry leader focused on creating custom white-label telematics solutions for dealer networks in the off-highway, construction, motor coach and agriculture industries, discussed the implications of the worldwide microchip shortage.

Although LHP Telematics doesn’t work specifically on agriculture equipment, it is a major suppler to the John Deere dealer network.

Jones said the reason the massive shortage happened is because at the beginning of the pandemic everything was shut down and the supply of microchips decreased.

The companies that were able to keep producing microchips were not manufacturing a lot because they were afraid people wouldn’t buy them and the products that use them. However, as individuals began working from home and kids were purchasing new video games, the demand for microchips began to increase.

The issue is that the demand for microchips has increased so greatly, Jones said.

“The biggest issue is that demand has skyrocketed,” he said, noting that individuals have been receiving stimulus checks and are able to keep purchasing items that require microchips.

However, this has caused a problem for companies like LHP Telematics that require the microchip to make custom-designed equipment for others like the John Deere dealer network.

Prior to the shortage, Jones said the company would usually ship out anywhere from 1,200 to 1,500 units that contained microchips each month.

The company that supplies the microchips to LHP Telematics won’t have enough made to fill the units needed for almost two months, Jones said.

Fortunately, he said, the John Deere dealer network and other customers understand the severity of the current microchip shortage and that other companies are also suffering, as well.

The next batch of microchips won’t be ready until June, and they already have enough orders to fill that will quickly use up all they receive, Jones said.

The company will probably be stuck in this loop for six to nine months, until the industry has enough microchips to stay ahead of the demand, he said.