Dramatically dubbed “chipageddon” by the media, the global shortage of semiconductor chips is no small hurdle for IT and procurement professionals as they grapple with longer wait times and price inflation for essential IT infrastructure.
The bad news is the ongoing issues sourcing hardware are unlikely to be alleviated any time soon. In fact, industry leaders expect the chip shortage to continue for at least the next two years, well into 2024.
The writing is on the wall: important hardware like laptops, desktops, and switches will be difficult to acquire for the foreseeable future, across the board. Unfortunately, this means multiplied revenue impacts, inflated costs, and disrupted business operations until further notice.
So, why is there a global chip shortage, and what measures can you put in place to mitigate its effects? Read on…
COVID-19: Our favourite global disruptor
To cut a long story short, the COVID-19 pandemic is the catalyst for many driving forces behind “chipageddon”. Like many other supply chains, COVID-19 is wreaking havoc on supply and demand dynamics in the semiconductor chip market.
Here’s how.
Remote working
When Aussies were sent home to work from home with laptops and monitors in tow in March 2020, we inadvertently kicked off a permanent increase in chip demand. Some emerging trends, including remote working and cloud computing, accelerated aggressively, and having a workstation at home and in the office became the norm.
The explosion in demand for portable workstations has since outstripped the unyielding, limited supply of chips available.
The problem is not easily fixed. Production is currently at maximum capacity, and it will take billions of dollars of infrastructure to make more chips. Plus, building the means to increase manufacturing can take over three years.
Lockdowns
Unforeseen lockdowns in key manufacturing hubs like China and Vietnam have caused supply chain bottlenecks and disruptions that have rippled across the globe – and Australia is no exception. As local authorities take action to stop the spread of COVID-19 (in some cases aiming to achieve “zero covid” like in Shanghai), manufacturers are facing more challenges, including:
- Stricter traffic controls have been enforced, meaning factories are finding it difficult to source essential components due to clogged logistics.
- Prevention measures have forced factories to stop production in some cases, paralysing assembly lines and disrupting their output.
As new variants of COVID-19 continue to emerge, lockdowns are likely to cause these issues regularly as nations struggle to control the spread.
Stockpiling
COVID-19, the war in Ukraine and overall geopolitical tension are all causing many companies to over-order and stockpile chips while manufacturers try to build new facilities and scale up production. As a result, there are even fewer chips available to those who are new to or re-entering, the market.
While this dynamic should normalise eventually, it’s unlikely to end well for chip manufacturers as there might be an oversupply, especially when production capabilities catch up to demand in the future.
Combatting “chipageddon”
Being diligent, innovative, and agile are key considerations for approaching hardware procurement during the global chip shortage. With this in mind, there are three major actions you can take as a business owner to mitigate the effects of “chipageddon”. So, let’s take a look at your options…
Option 1: Buy smarter, not harder
Do your research! Staying aware and informed of the shortages can go a long way. Once you’re well informed, take some time to scour the market for items that aren't directly in the flow of demand. This could look like purchasing higher specification devices than what is expected or choosing another vendor with similar features where appropriate.
Option 2: Be the early bird
You know how the saying goes! Your business doesn’t need to miss out just because there’s a shortage. Plan purchasing of new hardware well in advance so longer lead times can be accounted for and you’re not left in the lurch.
If you’re planning on getting in early, the main priorities should be:
- Identifying new hardware requirements that may arise over the next six months; and,
- Considering whether any of your current equipment is due for replacement.
In both cases, proactively placing your order ASAP is essential, as last-minute replacements pose a challenge right now. Ordering early can provide a safeguard against any delays and ensure your vendor has time to deliver the right infrastructure before it becomes a real problem for your business.
Of course, this isn’t a perfect science and sometimes the early bird misses out on the worm. As “chipageddon” continues, it’s important to keep cyber hygiene at top of your mind if you’re trying to get by using existing equipment. Older systems are often run on outdated software which is vulnerable to threats like malware.
Option 3: Make friends with a managed service provider
Managed service providers (MSPs) are an incredible asset to have in your arsenal as you come face-to-face with the global chip shortage.
Not only do MSPs have strong, long-standing relationships with a vast array of vendors – they can also leverage these relationships to solve key pain points for IT procurement in the current market, for example:
- Considering your long-term interests: MSPs act as strategic partners who want to work with your business long-term. They have your best interests in mind and will work to create a solution that will be practical and efficient in the future.
- Stock visibility: An MSP can access a vast network of vendor relationships that give them stock visibility beyond what normal companies can see. This is in stark contrast to going direct, which nowadays is as good as walking into JbHiFi unless you're a big corporation.
- Better price: Expertise and strong vendor relationships can also help an MSP negotiate advantageous prices and quick delivery – thereby saving you money.
Here at The Missing Link, we can advise on and deliver the right hardware and software to ensure your business is streamlined and running at its best. Further, we’re equipped to leverage our partnerships with key vendors, removing the risks and challenges from purchasing and updating IT infrastructure, vendor, and contract management.
To learn more about our IT procurement services and how we can support you during the global chip shortage, reach out here.
