Integrated circuit chips been around to see a dozen or so presidents, some moon landings, several decades of wars, and a changing global landscape. They’ve also gotten much smaller in size since their beginning and are featured in manufacturing of all-but-every electronic built today. These are most commonly known as microchips and we are currently experiencing a global crisis of supply. In its most basic form, a microchip is essentially an electronic circuit or series of circuits that rest upon a semiconductor base, very often silicon or a silicon-derivative. With demand at all time highs and manufacturing stunted, there is a predictable mess of a global chip shortage brewing.
What’s being affected?
Almost everything involving electronics. (There are some items that are produced using discrete components, such as boutique audio equipment, but this is a very small percentage in the scheme of “electronics”.) Certainly availability of PCs and mobile devices is or will be affected, but also items that may not be as evident at first glance such as cars, home appliances, televisions, and other “smart” devices.
What caused this?
In simplest terms, COVID-19 is the primary driver. The virus itself, of course, did not consume electronics but rather was the first domino that fell. Quarantines reduced working hours of production, creating a shortfall of supply. In response, several companies increased their orders and stock of the various chips was quickly drained. Additionally, partially due to increased digitization of our daily lives, but certainly accelerated by quarantines and less social activities, consumer demand for electronics including TVs, mobile devices, PCs, and gaming consoles skyrocketed. Additionally, business purchases increased as many businesses changed their day-to-day working model as folks engaged in work from home. (Selfless plug: Is your business working safely from home? Here are some keys to making sure you are.)
Political factors come in to play as well. While the US consumes almost 50% of the world’s microchips, it produces less than 15%. This reliance on importation opens to door to supply turbulence with embargoes, isolationist trade policies, and other unnatural market factors which have all played in to the supply crisis in at least a small way.
So, then, what is being done?
Different strategies are being worked on by both private and public entities to combat the global chip shortage. Unfortunately, it’s not as simple as snapping one’s fingers and increasing production. Factories equipped to manufacture these items often cost in the billions, and thus are a long term investment. Still, some companies, such as Intel and Taiwanese Semiconductor Manufacturing Co. (or TSM, as the company is mercifully and commonly referred to) have plans to build additional factories. But this will take time. The US Administration is working on legislation to subsidize chip production nationally, as is the Chinese government.
What does this mean for you?
This will affect SMB in many ways, especially—but not exclusively—when it comes to IT. (For example, if the business or organization exists in a manufacturing vertical dealing with electronics, IT may not be the primary concern!) Boiled down, lower supply equals higher demand. Higher demand equals higher costs. Companies may have to look outside their normal standards to find similar products for workstations or peripherals, for example. Hardware orders may take (sometimes significantly) longer to be fulfilled by vendors, and IT projects may be delayed.
This highlights a need for proper planning and perhaps some additional padding in IT budgets specific to integration projects. A company’s decision makers may need to weigh the real cost of moving forward now and paying a little more versus the opportunity cost of waiting.
If you need some assistance with budgeting or planning, contact us! Even better, come on board as a contract customer! We offer our customers periodic business reviews which can help in dealing with unforeseen events such as this, and help your company stay on focus while we worry about the stormy seas of—in this case—global chip shortages.