The chip shortage impacted every major industry during the pandemic-caused recession. But now that business growth is coming back, many businesses need more IT now. Read to find out how to adapt to the new normal.
“I have never seen delays like this in our industry.”
— Kelsey Kingsbury, Procurement Manager
IT hardware manufacturers around the globe are having trouble securing supplies of semiconductor computer chips, delaying the production and delivery of goods and threatening to push up the prices paid.
Foundries have increased wafer prices for chip manufacturers, which increases the costs passed downstream to consumers and businesses.
A shortage of all sorts of processors and other components could affect the availability and price of IT hardware for the next 12 to 18 months, according to CEOs of major tech companies including Intel, IBM, Extreme, Cisco and Juniper.
Gartner, a leading research and advisory company, projects the shortage to extend until Q2 2022 with lessening impact until then.
*Gartner Says Global Chip Shortage Expected to Persist Until Second Quarter of 2022 2021
Why Will the Chip Shortage Last So Long?
Several factors are driving the shortages, including the coronavirus pandemic, which plunged the global economy into recession last year, upending supply chains and changing consumer shopping patterns. During the pandemic, tech companies, whose products were boosted by lockdown living, snapped up as many as they could. Other shocks, such as US government sanctions on Chinese technology companies and extreme weather, have also contributed to the shortage of supply.
But ultimately, the bottleneck occurs at the chip supplier level. Manufacturers of substrates, wire bonding, materials and passives were operating at full capacity prior to the spike in demand. They cannot and in many business cases should not build more capability when the demand will return to normal levels in a relatively short period of time.
When to Order IT Hardware?
According to Goldman Sachs, 169 US industries embed semiconductors in their products. The bank is forecasting a 20% average shortfall of computer chips among affected industries, with some of the components used to make chips in short supply until at least this fall and possibly into 2022. While the shortage will reduce in severity over this period of time, we should still plan for significant delays in the purchase process.
If you are planning on ordering any new computers or other IT hardware by the end of this year or at the beginning of 2022, you should order now.
“We are seeing delays right now of weeks and even months on laptops, desktops, servers, docking stations, switches, i7 processors, LCD monitors and wireless access points,” said Platte River Networks’ Procurement Manager Kelsey Kingsbury. “Clients should think about ordering sooner rather than later. When stock becomes available, back-orders are filled first and inventory is gone within days. I have never seen delays like this in our industry.”
Since many businesses end their fiscal year in Q4, IT leaders need to walk back their anticipated hardware requirements and order as soon as possible. There has been a recent price drop for many chip types; however, this does not mean we should expect delivery windows to return to normal. Instead, we should take advantage of what might be a temporary drop to consolidate orders through the end of year.
About Platte River Networks
At Platte River Networks, we try to proactively set expectations, especially when there might be a temporary decrease in service level. Our clients rely on IT, and we want to make sure they stay on top of trends to achieve optimal business results.
Questions about the Chip Shortage?
Please email david@platteriver.com for more information.
