Planning Hardware Upgrades During a Global Chip Shortage

 In Blog, IT Solutions

Earlier this month Qualcomm Inc, the world’s largest supplier of chips, warned of chip shortages “across the board” and the “most serious shortage in years” as they posted their fiscal Q1 earnings. The first hints of a chip shortage emerged as the pandemic uprooted production and normalcy across society last Spring. Qualcomm cites the industry’s reliance on just a handful of suppliers in Asia as a source of the shortage as regions hoard supplies amidst surging demand. As people work from home and replace normal non-electronic pastimes with more screen time and new devices, this increase in demand for electronic devices is amplifying the effects of the shortage. The shortage is also fueled by the current transition from 4G to 5G smartphones as manufacturers such as Apple race to create supply for the latest handhelds and carriers race to build out spectrum. Car manufacturers such as General Motors and Ford have been forced to close North American plants and halt production because they simply cannot source enough chips. The shortage is expected to cut $61 billion in sales for automakers in 2021 alone. The extent of the damage to other industries is still unknown. PC manufacturers, such as Lenovo Group, have already started to hint that the shortage will begin to affect the supply of computers.

Just as the pandemic revealed supply chain issues across many industries as factories were shuttered, our reliance on electronic devices is almost completely reliant on Asian companies — primarily Taiwan Semiconductor and Samsung Electronics. Taiwan Semi stated in their latest earnings call that customers have been stockpiling chips in anticipation of the shortage and potential sanctions. Just as retailers early in the pandemic ran out of toilet paper which created a hoarding effect and further limited supply, Taiwan Semi sees this trend continuing with their customers for some time.

The shortage has also extended to the gaming industry with Nintendo Co, Microsoft Corp and Sony all struggling to produce enough consoles to meet demand over the past year. And the gaming industry is expecting the shortage to get worse before it gets better with a high likelihood it extends into the next holiday season.

The shortage in chips could also create a national security concern as the shortage spills from internet giants establishing cloud data centers to autos, healthcare and defense contractors. The U.S. simply lacks the infrastructure it needs to supply its own semiconductors and is completely reliant on Asia and more specifically Taiwan and South Korea. The economy today runs on semiconductors and as we are seeing, any disruption in supply can have rippling effects across industries. Taiwan Semiconductor and Samsung have both announced plans to build plants in the U.S. but it will take decades to establish significant production. The U.S. currently supplies less than 10% of global chips through smaller manufacturers such as Micron Technology, Inc.

As demand for Wi-Fi, Bluetooth, IoT devices, handhelds, laptops, and servers continues to grow, there appears to be no near-term solution to the semiconductor shortage and disruption to supply. Businesses looking to expand networks or update hardware may have a difficult time sourcing equipment right now. If you are planning any CapEx in your near-term IT budget, let’s talk about sourcing your hardware sooner rather than later.


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