NetworkTigers explores how OEMs navigate the global chip shortage with innovative strategies to meet demand and drive resilience in the tech industry.
Since 2020 the lingering effects of the global chip shortage continue to affect numerous fields. A study from Germany reports that 89% of machine builders have been negatively impacted by the worldwide chip shortage, from automotive manufacturers to hardware developers, agriculture to logistics and fulfillment.
OEMs, or Original Equipment Manufacturers, are poised both to be affected by and provide a much-needed source of relief from the global chip shortage. OEMs often save companies time and effort by specializing in manufacturing a unique component of a larger product. Because of this, many OEMs can also provide direct-to-consumer solutions when supply chain issues bog down the secondary manufacturer. In the past few years of the global chip shortage, OEMs have been nimble sources for creative solutions that often outpace their “name brand” counterparts. In 2025, OEMs are poised to tackle the global chip shortage with some of the following innovations:
Emerging partnerships
Consumers can expect to see a blossoming of joint ventures and more streamlined communication between larger companies and OEMs in the future. A more closely aligned IT architecture, such as cloud integration, can allow companies and OEMs to share data more efficiently, reducing delays and allowing both entities to work directly together.
Tech OEMs can receive early updates about production capacities and consumer demand from their suppliers (secondary manufacturers). This enables OEMs to quickly identify shortages or limitations and notify their suppliers in real time. As a result, manufacturers can adjust their operations more efficiently to meet changing market conditions.
Diversifying supplier base
One of the reasons the global chip shortage had such a significant impact is that microchips are incredibly complex to manufacture. Creating a functioning semiconductor chip is closer to urban planning than a traditional build and solder. Complicated data highways, circuitry, and layering must all take place at a minuscule level, using valuable materials, with proprietary design, and with extreme precision. Because of this, microchip production is a highly specialized field. Approximately 75% of semiconductor manufacturing occurs in Taiwan, South Korea, and Japan. Taiwan is responsible for a staggering 92% of advanced chip manufacturing capacity alone. This level of market concentration can easily lead to supply disruptions due to natural disasters, political instability, or events like the global pandemic.
OEMs can help diversify the supplier base for secondary manufacturers. Working with disparate OEMs can ensure companies have a source for crucial materials. Likewise, OEMs that rely upon chip construction in the Taiwan-South Korea-Japan region should perhaps consider prioritizing development in additional areas of the globe to leave them less vulnerable to single-location supply chain shocks.
Retrofitting and refurbishment
When scarcity arises, OEMs are poised to provide direct-to-consumer replacements to retrofit or refurbish existing models. OEM products are manufactured to a high-quality standard and often carry a guarantee that they will fit and work perfectly. Because of this, working with an OEM can allow consumers and businesses who order to retrofit existing models to essentially “skip the line.” Doing so can also make businesses more sustainable, extending existing tech’s lifecycle and reducing the burden on recycling centers while protecting confidential data stored on older servers and machines.
Launching new design ventures
Some OEMs are now expanding and considering setting up chip manufacturing facilities. While this takes a long time, Gartner predicts that by 2025, around 50% of the top OEMs in the automotive industry will design their own chips due to ongoing shortages. This style of consolidation, known as OEM-Foundry-Direct, can lead to customized chip design, more efficient shipping and logistics, and other side effects of market consolidation.
Substitutions
Substitutions, like retrofitting, can tackle the problem more creatively. An agile OEM can retool its electronics to respond to customer needs. If a particular part is unavailable, the OEM has the option as the original manufacturer to shape their response accordingly and work from the ground up to solve the problem.
While substitutions are not a long-term fix for shortages, they can provide a new way to adapt more swiftly to changing consumer needs while supply chain issues remain stagnant. In this way, OEMs create more choices. They help companies prioritize what design components are non-negotiable and what areas consumers may be willing to be more flexible on. This can lead to increased competition and lower prices.
As the world has become increasingly digitized, the demand for semiconductor chips continues to outpace global availability. However, OEMs are uniquely poised to pivot towards profit in the continuing chip shortage. One positive result of the years of chip shortages is that US and European OEMs have been pressured to increase their creativity and production capabilities. This may leave the world looking forward to a possible “chip boom” that could lift market shares as high as 45% by 2032.
About NetworkTigers
NetworkTigers is the leader in the secondary market for Grade A, seller-refurbished networking equipment. Founded in January 1996 as Andover Consulting Group, which built and re-architected data centers for Fortune 500 firms, NetworkTigers provides consulting and network equipment to global governmental agencies, Fortune 2000, and healthcare companies. www.networktigers.com.
