Circular Economy

Can We Evolve from the Chip Shortage to Better Supply Chains and Consumption Habits?

As the global chip shortage drags on and demand for electronics exceeds supply, we hope that the market for refurbished electronic devices and a circular economy will gain more traction.

Brand Provided | By Lauren Benton | Published 3 years ago | About a 4 minute read

Image: Yan Krukov/Pexels

By now you have likely heard of the global microchip shortage or been impacted by it somehow. Chances are anything you bought online in the past year, especially if it was an electronic device, cost more and took longer to deliver. That is because microchips (aka semiconductors) are necessary at so many points along the electronics supply chain. Much of the focus has been on the fact that the manufacturing stage of our personal electronic devices is chip intensive; but the logistical side needs to be considered, as well: Cars, boats, planes, trains, delivery trucks — all motorized vehicles rely on microchips to get your order to you. It really makes you think differently when you go to buy a new laptop or phone. Supply and demand issues happen all the time across all industries; but this one specifically has impacted everyday consumers profoundly. As demand for chips is only predicted to increase in the coming years, one growing sector is poised to help keep the floor from falling out of the technology sector.

This is, of course, refurbished electronics. The growth of this sector would alleviate some of the supply pressure put on manufacturers, whilst meeting consumers’ demand for electronics from smartphones to appliances. And this would also help push the price of electronics down by keeping more of them in circulation longer.

Technology companies prioritize selling the latest and greatest, and unsurprisingly have not been overwhelmingly supportive of the repair market. However, with the COVID-fueled global chip shortage, the industry’s ability to continue churning out shiny new devices took a hit in the past year — and consumer demand now outpaces supply in a number of industries. But, contrary to what it may seem, the chip shortage is not all doom and gloom.

Embracing a circular economy

Supply chain issues will help push us towards more sustainable tech options, thus providing consumers with better value and the planet with better options. Refurbished electronics are more readily available and offer nearly the same "must-have" features, all at a much more affordable price.

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Big tech companies’ business model centers on new product sales every year, which takes a toll on the environment. Only 20 percent of electronics sold are properly recycled, and the rest end up in landfills. This makes e-waste the fastest-growing form of waste in the world. Most big tech companies have vowed to become carbon neutral by 2030; if they want to achieve that goal, they will have to start embracing a circular business model — as major players including Apple, Samsung, Microsoft, HP and more are slowly beginning to do.

That’s where refurbished electronics come in. The industry has seen huge strides in recent years in terms of quality and customer protection. Customers now have a wealth of options to choose from to get good-as-new tech for less. Of course, more options can mean more homework for consumers. That’s why we are seeing marketplace models such as Back Market grow. Marketplaces do the legwork — they often set quality standards among providers, provide guarantees and minimize risks, and make the proposition of buying refurbished electronics a lot less risky.

Refurbished providers are addressing a rapidly growing environmental issue by giving consumers a choice. Most if not all of the major cell service providers offer 2-year contracts and other deals that make it enticing for customers to upgrade to the newest device; sometimes they can upgrade for free just by signing on. This may seem like the norm in the US; but the truth is, this model is inherently unsustainable due to the massive amount of e-waste it produces. With good-as-new, refurbished options offered by companies such as Back Market, breaking away from the linear model that has served big tech for decades can be achieved. This is also relevant at a corporate level, as it gives environmentally conscious brands the option to supply their workforce with devices that have a much lower carbon footprint.

Conclusion

As chip supply catches up to demand, we hope that the refurbished market and a circular economy can gain more traction. Interestingly, 50 percent of customers in the US that bought from Back Market in the past year were trying refurbished for the first time. This points to how young the circular economy is — and how much it can grow with a little help from, well, everyone. You can make sure your devices do not end up in a landfill; there are plenty of options to keep your old device in circulation. The demand for devices is not expected to decrease, therefore shortages in electronics will likely persist. If you are in the market for an electronic device, buying used is certainly a smart option — not only for your wallet, but more importantly for the environment.