Key battery backup components at risk
The challenge to battery backup production has manifested in relation to three key components – inverters, batteries, and cables.
Inverter production suffered from the global microchip shortage that affected industries worldwide. Inverter chips use a specific integrated circuit (IC) that supports inverters in how they convert direct current (DC) to alternating current (AC). But due to severe disruptions in the supply of microchips, inverter production slowed down or halted in some instances.
What caused the chip shortage in 2021? Again, there are multiple factors responsible for the crisis, including the tailwinds of the pandemic and an unanticipated surge in demand for automobiles. During the height of the pandemic, microchip production either stalled, slowed down, or was diverted to other end uses. As a result, the forceful return of demand in early 2021 caught most producers cold, and from there, the supply woes only deepened.
The industry also suffered from the minimal global production of chip technology. Very few countries possess microchip production expertise worldwide, and this limits manufacturers to a small pool of potential suppliers. Perhaps governments worldwide will
take the lead of the EU and increase their local capacity for microchip production to help de-risk this sector.
Similarly, battery cables were severely challenged by the global supply chain squeeze, particularly the meteoric rise in the cost of raw materials. As mentioned earlier, the combination of high transportation costs and labor shortages made component sourcing prohibitively expensive. In typical fashion, suppliers transferred these costs to their client manufacturers, increasing raw material costs.
In an industry that already operates with slim margins, expensive input products only squeeze those margins tighter. These conditions force cautious manufacturers to downsize production or choose to wait things out, while bolder companies might find innovative ways to pass the costs on to final consumers.
Lastly, while batteries also suffered from the input problems other components endured, challenges from transportation costs were more prominent here. Companies require reliable and affordable shipping to procure critical supplies, just as they need cost-effective options for final delivery to consumers. However, with transportation costs running away in 2021, procurement and fulfillment became more difficult.
These shipping challenges, combined with the unprecedented post-COVID surge in demand, complicated battery backup production in 2021. Manufacturers look forward to a return to normalcy and a stabilized industry with the passing year.