How to Navigate a Global Chip Shortage

Connection

Whether they are following headlines about chip and technology shortages or have encountered long waits for specific items, consumers and business buyers alike are increasingly becoming aware that supply chain issues may be impacting technology availability. The New York Times recently reported that a global chip shortage has hampered automobile production, while Statista notes that brands (including Apple) faced shortages that led to production delays. If you’re interested in learning more about the global chip shortage—and how to create a strategy that optimizes your technology access—read on.

What’s Driving the Semiconductor or Chip Shortage

It can be helpful to take a step back and ask what is driving the semiconductor or chip shortage. CBS News recently reported that 75% of the world’s semiconductors are manufactured in Asia. Some of the challenges have been traced back to COVID and, in particular, how this year-long period has highlighted some of the fragility of the global supply chain. However, the shortages we’re currently seeing are impacted by a wide variety of factors:

The core issue is a raw material shortage.When you think about what devices use a chip, your first thought may be your desktop computer or laptop. However, we live in a world where devices are increasingly being made smart. It’s not just the CPUs and GPUs that go into your computing equipment; it’s every smart home device, every networked computer, every automobile with computing features. All these devices rely on the same core underlying infrastructure and raw materials. Raw materials shortages have become an increasing problem as chip usage reaches an all-time high.

Long lead times make the issues harder to address.
Ordering components for a PC begins a long time before that device is manufactured; in some cases, months or even a year or more. Complex supply chains have many moving parts, and companies are managing relationships that span multiple companies, geographic regions, and much more. A number of companies have announced plans for plants to manufacture chips in the United States. While companies have invested in the capacity to help reduce the impact, it’s important to remember that because of these long lead times, these changes may not alleviate short-term challenges.

There’s been a wide brand impact.
The challenges go beyond the name brands American consumers are familiar with. Globally, these shortages are impacting nearly all brands that rely on these items.

Chip shortages affect more than just PCs.
Outside of integrated circuits, these shortages are having an impact on a wide range of devices, including audio, Wi-Fi chips, imaging devices, and displays. Many industries compete for these materials, not just PC manufacturers. For example, auto manufacturers have had to limit production due to a lack of raw materials. We are also seeing impacts to printer and PC accessories availability. All these devices use the same raw materials and will be challenged with availability.

Companies are exacerbating the situation by stockpiling chips.
It was recently reported by CNBC that some companies—for example, those in China that have been hit with sanctions—are stockpiling chips to ride out the shortage. Across supply chains, these types of actions can further compound shortages and make it difficult for manufacturers to get the supplies they need.

What Are the Consequences of Chip Shortages?

While industries have been dialed into this issue for some time and focused on solving the problem, it’s important to consider how the situation may impact you as a buyer. As outlined above, national, global, industry, and company initiatives to correct for these challenges will take some time to fix.

When you’re purchasing technology and equipment for your business, you may experience:

  • Longer wait times to have orders fulfilled and shipped
  • Specific brand or device shortages that require you to choose an alternate brand or model
  • An increase in prices that can be passed on to buyers

There’s absolutely no need to panic. Government and private sector conversations are happening on how to address and alleviate the chip shortage. However, some experts suggest the impact may carry into 2022. As an informed business buyer, looking ahead and having the right strategy can help ensure you have access to the technology you need and the ability to minimize any inconvenience to your business.

What Steps Can You Take to Mitigate the Impact of Chip Shortages?

Connection recommends several proactive steps you can take today to help minimize the impact, alleviate challenges, and manage expectations.

Plan Ahead
The number-one strategy buyers can use to limit the impact of a chip shortage is to plan ahead. If you anticipate needing technology at any point in the next 6 to 12 months, consider ordering it now while it’s available—or so you’re at the front of the line as companies work through their production backlog. Ordering products before they’re urgently needed will allow you to get the technology you need without having to compromise or troubleshoot around a long-term delay. For many companies and individual consumers, this is a different approach to our “just in time” technology buying habits. Take time to assess whether you need to acquire new technology as part of your ongoing hardware lifecycle management, to support projected growth, or to have inventory on hand to replace non-functioning equipment.

Expect Some Delays
Even if you place an order now, fulfillment times may be longer than expected. Where possible, plan for delays. Not every order is going to be one you can plan ahead for. Someone with a damaged or stolen laptop, for example, may need an immediate solution. Communicate with your vendor to understand timelines, and set expectations with your users accordingly. By knowing your place in line, opening communications, and checking ongoing status, you’ll have the latest information on hand. Where possible, practice and counsel patience.

Flexibility Is Key
As a company or individual buyer, you may have a preference for which brand or model of technology you’re purchasing. However, if you’re willing to be flexible you may be able to solve the problem. Imagine onboarding a new employee: If the brand of laptop you always buy is on backorder, you may be able to obtain a device today that can enable them to be productive. It might not be the exact model, brand, or device you’re used to using, but that employee can be productive using it for the short-term.

Evaluate Virtual Solutions 
Hardware isn’t always the only option. For example, virtual desktop infrastructure can be used to give your users a PC-like experience on a different device, such as their tablet or mobile phone.

Chip shortages are impacting industries around the globe, and technology buyers may see some impact over the next several months. But don’t despair. By being proactive, flexible, and strategically thinking ahead, it’s possible to mitigate the shortage’s effect on your business and have the technology on hand to keep your employees connected, productive, and moving forward. Connection can help you create a plan to meet your needs. We will guide you through the shortages and find a strategy that works for you and your business. Reach out to Connection today to get started.

Leave a Reply

Your email address will not be published. Required fields are marked *

© 2020 CONNECTION, INC. ALL RIGHTS RESERVED.