Is the global chip shortage still affecting the supply chain?

Since 2020, the world has been in the throes of a global chip shortage. From musical instruments to game consoles, automobiles and network equipment, many formerly common items have become hard to find and purchase. What caused the shortage, how long will it last and what can IT professionals do to navigate around it?

What caused the global chip shortage?

While most are quick to blame the COVID-19 pandemic exclusively for the chip shortage, a number of other factors are also contributing to a lack of semiconductors.

• The transition to remote work. As people began working from home offices all over the world, demand for the electronics needed to do so increased dramatically. These skyrocketing sales, in turn, increased demand for the components needed to build the devices people depend on.
• The transition back to the office. Companies trying to return to in-office workforces had a similar effect on semiconductor demand. To prepare their networks and facilities for their staff’s return, companies had to purchase new network hardware. This placed a great deal of additional strain on an already challenged supply chain.
• Slowed or stopped production. As coronavirus outbreaks rolled through the world, manufacturers were forced to shut down their operations just when their products were needed the most. These shutdowns have had a rippling effect across all major industries.
• US and Chinese rivalry. US policies with regard to Chinese semiconductor manufacturers have resulted in them stockpiling chips. This is, in part, due to sanctions placed on the companies, but is likely also an intentional maneuver to punish the US by starving the country of the chips needed to build technology.
• Cryptomining. As cryptocurrency came into the mainstream, miners gobbled up GPUs in bulk to use for mining. This left PC owners scrambling for parts with some resorting to purchasing from scalpers.
• Consolidated manufacturing. A problem that existed prior to the pandemic is that so few companies manufacture semiconductors. With only a handful of companies supplying the vast majority of the world’s chips, any disruption among them is felt internationally.
• New facilities take time. Building new manufacturing plants takes billions of dollars and years of work and planning.

How long will it last?

People in all industries are eagerly anticipating the end to the global chip shortage, as increased demand has caused prices to rise exponentially. Automobile manufacturers in particular have not been able to produce products as a result of supply issues, causing falling profits.

Unfortunately, the outlook for a swift return to semiconductor availability does not look promising.

Many predict that it will persist into 2024 and possibly beyond. These predictions, naturally, do not take into account any new strain that may be placed on the market by more COVID-19 outbreaks or innovations in computing that further increase demand.

Tensions between the US and China remain escalated, with no signs of cooling in the near future. We can expect China to continue to expand the country’s domestic technology manufacturing while limiting their chip exports to other countries.

Technology also continues to march forward. With so many of the items and appliances we interact with on a daily basis containing chips, supply will be spread thin and problems will continue to show up in unexpected markets.

The US buys 47% of the world’s chips but only produces 12%. With new plant construction a long term strategy, there is no quick way to build more chips within America’s borders.

How can IT administrators navigate the chip shortage?

A lack of video game consoles or TVs is inconvenient. However, when your career requires you to procure, provide and maintain equipment that is loaded with semiconductors, the chip shortage is felt firsthand in a powerful way. IT professionals have been scrambling for ways to keep moving forward amidst so many obstacles.

Here are some tips for keeping afloat during the crisis:

1. Use equipment longer. If an update to your current hardware is not completely necessary, skip it. Work to get the most out of the gear already running and be sure everything is updated to keep up with today’s demands.
2. Buy used gear. While prices for used gear are rising, pre-owned and refurbished network equipment is still easier to get than new hardware. Check the used market regularly for good deals and be sure to only make purchases from reputable dealers to avoid scammers.
3. Consider switching vendors. Everyone is feeling the squeeze, but some vendors may be able to get equipment to you faster than others. 
4. Plan ahead with your vendor. Explain your upgrade path with your vendor to try to formulate a plan that allows you to make the changes you need as equipment becomes available. Knowing restock and shipping schedules, even if tentative, can prevent potential headaches.
5. Buy ahead of time. Gear hoarding is a contributing factor to the global chip shortage, but unfortunately it can’t be helped. Purchasing equipment before you need it will prevent you from being stuck without it. While this tactic puts strain on your budget, it is a degree of insurance against future shortages or problems.
6. Move to the cloud. You can avoid the stress of not being able to buy new hardware by making a switch to the cloud. While there are a number of reasons why moving to the cloud may not be right for your company, it just might make shopping for overpriced, hard to find components a thing of the past.
7. Build based on availability. Your dream system may have to be put on hold. To making ends meet you need to think creatively and be open to building based on what you can get your hands on at the moment.
8. Expect delays. When it comes to forecasting updates and building your network, expect everything to take a lot longer than it would have a couple of years ago. Take a deep breath. Patience will allow you to make sound decisions with regard to your planning. All IT professionals are feeling the effects of the chip shortage, with wait times for some components ranging from 28 to 52 weeks.