Since the onset of the pandemic, we have all become accustomed to intermittent shortages of items – who can ever forget the loo roll fiasco? Well, now it seems it is the turn of chips. No, not the sort you slather with salt and vinegar, but the semiconductor, computer chip variety. Unfortunately, this is having far-reaching effects on the IT industry as a whole, with supply delays causing headaches. So, here we look at what is behind this issue and how long it might persist, as well as suggesting some outside-the-box solutions to overcome any difficulties it causes.
Is the global semiconductor shortage scuppering your IT plans? Think outside the box for solutions with Prodec
Referred to by some as ‘chipaggedon’, the shortage of semiconductors, also known as computer chips, is affecting the supply of millions of products that contain these integrated circuits – from cars to smartphones and washing machines to a wide range of business IT hardware. This is inevitably causing a great deal of inconvenience to many, but as this seems to be an era of shortages, perhaps we should not be too surprised at the latest incarnation of this increasingly commonplace issue. Indeed, one of the many lessons learned from the pandemic is our dependence on supply chains to maintain our way of living, and when these fail, many are affected. For example, who would have thought, pre-2021 that the UK was so reliant on the production of CO2 for a wide range of food products, and without it, we could all see empty supermarket shelves? In fact, the coronavirus crisis has highlighted just how tenuous our modern lifestyle is and how it can so easily be derailed if one vital component disappears. So, what lies behind this current chip shortage? How long might it last? And what can we do to ease the pain of this palaver? We dig a little deeper, to discover the answers.
Why is it happening?
As with many such shortages, much of this issue can be attributed to an imbalance of supply and demand – struggling supply and skyrocketing demand – I refer you back to the toilet roll conundrum! In this instance, the pandemic has inevitably been a major contributory factor to the situation we now find ourselves in. Indeed, since the start of the coronavirus crisis, the demand for technology, containing such chips, has shot up, with IT equipment to enable remote working and home-schooling flying off the shelves. In fact, PC sales alone rose by 13% in 2020, and purchases of home entertainment technology, for recreation during lockdown, reached a record high.
So, while global semiconductor sales dropped between 2018 and 2019, sales grew by 6.5% in 2020, and according to the Semiconductor Industry Association (SIA), sales for May 2021 were 26% higher than at the same time the previous year. In addition, production levels have also inevitably been hit by outbreaks of COVID-19 in factories around the world. Add to all this, the current transportation industry issues, with shortages of HGV drivers, fuel scarcities, increasing costs of container shipping and reduced air freight capacity affecting the ability to get items from A to B, and you really do have the recipe for IT shortages, delays and rising prices.
Various world events, including the large container ship which blocked the Suez Canal earlier this year, have exacerbated existing issues in the global supply chain and have caused significant delays with the shipments of electronic components and devices.
However, contrary to what you may think, we cannot pin the blame of this shortage purely on the pandemic. This seems to be an issue that has been brewing for years. In fact, according to Koray Köse, an analyst at Gartner, pre-pandemic pressures on the industry, which have played a part, include the rise of 5G, increasing demand, and the decision by the US to prevent sales of chips and other technology to Huawei, causing the company to stockpile and deluge makers outside the country with orders. Indeed, the possibility of such a chip shortage was flagged up, in February 2020, by industry news site Semiconductor Engineering, because of rising demand and lack of manufacturing equipment for lower-cost chips, made from 200mm circular silicon wafers, rather than the more expensive 300mm variety. Moreover, it seems that a plethora of factors has contributed to the current crisis. For example, a severe storm shut down a chip manufacturing facility in Texas, and a fire at a large Japanese production plant also played a part.
When will it end?
With so many suffering the infuriating inconvenience of delays in getting the vital IT they need, ‘When will it end?’ is the million-dollar question. In fact, as many industries are being hit hard by this shortage, such as the car industry, which is projected to lose $210 billion in revenue as a result in 2021, this is a very pressing question indeed. However, there are no easy answers, but the overall consensus is that it could take considerable time to rectify the issue. According to Pat Gelsinger, CEO of Intel, the world's largest semiconductor manufacturer by revenue, the difficulties are likely to take a few more years to be resolved. This sentiment was echoed by Jim Whitehurst, IBM President, who was a little more specific, saying the issue could continue for two years. However, Chuck Robbins, Cisco CEO, offered a glimmer of hope, when he spoke about the problem back in April, suggesting that shortages should get better and better over the following 12 to 18 months, as providers build up more capacity.
So, while manufacturers may be ramping up production to address the shortage, Falan Yinug, Director, Industry Statistics and Economic Policy at SIA explained why this takes a while in a blog earlier this year: ‘Unfortunately, increasing semiconductor capacity utilization takes time, because semiconductors are incredibly complex to produce. Making a chip is one of the most, if not the most, capital- and R&D-intensive manufacturing process[es] on earth.’ In fact, he points out that it can take as long as 26 weeks to manufacture a finished chip for a customer. So, it would seem we may have to buckle up for the long haul, where chip and associated technology shortages and delays are concerned, but take heart that things are set to gradually improve.
This is all well and good, but what do you do in the meantime if you are struggling to source that vital bit of technology kit your business needs to keep going, or your digital transformation plans are being scuppered by IT hardware that is missing in action? Well, the good news is that while you should still be able to get those items eventually, there may be alternative options and ways to mitigate the effects of delays and lack of availability. This can require a little innovative thinking, but that is something that Prodec Networks specialises in, and we have been busy helping our customers to come up with some savvy ways to think outside the box for solutions, at least until the challenge of the missing chips is resolved by manufacturers. For example, one such outside-the-box solution could be to buy vendor approved, good-as-new remanufactured products, which may be available swiftly, as an alternative to IT which is subject to delays. Another possible method to see you through any supply delays, is to purchase extended technical support for IT which may be near end of life. In this way, you can have a safety net in place until new items arrive.
Cloud-based solutions can also offer some excellent ways to side-step the impact that semiconductor shortages are having, as these may be available more quickly when other technology is delayed. For instance, implementing infrastructure as a service (IaaS) can rapidly add much-needed extra capacity for new projects and increased workloads, avoiding frustrating hold ups from sluggish supply of equipment affected by chip shortages. In addition, deploying disaster recovery as a service (DRaaS), or backup as a service (BaaS), can ensure all your data is protected, and provide peace of mind, while you wait for replacement IT products.
So, while there may not be much that most of us can do to fix the shortage of microchips, and the knock-on IT supply delays, nothing needs to grind to a halt. With the aid of innovative, outside-the-box solutions, including fully managed cloud services, your business can continue to function and thrive in these challenging times.
If you are concerned about current IT supply delays, or are already experiencing issues, contact Prodec today, to find an alternative solution that works for you.