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What to do when the chips are down – what’s causing the global semi-conductor shortage and what you can do about it

If you’ve needed to order new tech – consumer or business – you’ve likely encountered a dreaded “out of stock” message. Even when you can place an order, wait times are in spans of months rather than weeks. The IT industry has been particularly affected as the face of tech supplies for business. Unfortunately, the situation isn’t going to change any time soon, but there are ways to mitigate the effects. We take a look at how we got here and what you can do about it.

The unavoidable consequences of Covid-19

We know you’re sick of hearing it, but Covid-19 has had a staggering impact on almost every facet of life in the last two years. One of the biggest has been how workers across many industries have had to move to remote work. This caused a massive surge in demand for computers, network peripherals and other consumer electronics that contained chips.

However, many chip production facilities were shut down due to government-mandated lockdowns. This, in conjunction with other factors below, meant that inventories depleted rapidly with no new stock coming in.

Computer sales were up almost 30% in 2020 compared to the previous year and demand never slowed down. Even though production facilities have started up again, there is an ongoing demand deficit they can’t catch up to.

Trade war, what is it good for?

Rising tensions between China and the USA led to tariffs placed on imports from the Eastern giant. Many industries that relied on materials from China were impacted severely and in many cases were forced to find alternate suppliers and raise prices. Much of the technology used in the UK is from American companies that were affected by this.

In September 2020 restrictions were placed on China’s largest chip manufacturer that reduced their ability to sell to American companies. While they were able to use other manufacturers’ plants, these were already operating at full capacity. Currently, there are simply not enough chips being made to meet the requirements of companies across the globe.

Wild weather makes an impact

Two extreme weather events over the last two years have had an impact on semi-conductor supply. Firstly, a severe storm in Austin Texas in February 2021 forced two manufacturing plants (owned by Samsung and NXP semiconductors) to shut down for a period. It’s not an effortless process to restart production and get things going again. It can actually take several months before the plant starts producing chips again. In a landscape where chips are already in short supply, this kind of delay can have an outsized impact.

On the opposite end of the temperature spectrum, fires at plants in Japan and Berlin in 2020 and 2021 – and a recent one in January 2022 – have caused shutdowns and delays. The Berlin plant impacted the production of extreme ultraviolet lithography equipment, which is used in chip production.

With the supply chain already under immense strain, these plant shutdowns have brought it close to snapping.

When you can’t reach for another chip

Unfortunately, as you can see, it is unlikely that the semi-conductor shortage is going to be resolved in the short term. There are too many factors at play and we’re not even completely through the pandemic yet. But that doesn’t help much for businesses that need technology and solutions today. Here are a few ways you can mitigate against the chip shortage and ensure your organization is on the front foot.

  1. Start planning now – If you absolutely must order new kit (and we do understand that sometimes it is unavoidable), then plan for and order as soon as you can.
  2. Build agility into the supply chain – If you rely on only one manufacturer, then you may struggle to get needed items. By working with a partner or reseller, they can problem solve and are not beholden to sourcing items from a sole source.
  3. Ensure that older kit is supported – Where possible, extend warranties and ensure your team (or outsourced agent) is able to maintain and support older items.
  4. Consider refurbished alternatives – When it’s impossible to find new equipment, it’s an option to use refurbished goods. Much of the time, the equipment has been replaced before it’s reached the end of life and is still perfectly suitable, and cost-effective, for the needs of a business. This is especially the case when it comes to enterprise equipment like servers.

We’re here to help find a solution to your IT needs. Get in touch via email or by calling +44 (0) 203 0922 and let’s have a chat.

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