Currently, hundreds of thousands of products ranging from smartphones, washing machines, to cars rely on semiconductors, otherwise called computer chips. But right now, companies producing these chips cannot meet the global demand. Due to this shortage in supply, many products are scarce while others are yet to hit the market as anticipated.
It is almost impossible for gamers to purchase a PS5 console. Also, companies like Volvo, Toyota, and Ford have slowed down production. Smartphone makers like Apple have already issued a warning to consumers that the scarcity of computer chips may affect the sale of iPhones.
So, almost all industries are feeling the heat. Even shoppers have noticed the problem. People now opt for used cars because new cars, which usually contain several semiconductors, are scarce. You may want to watch this video to find out what semiconductors are and how they work.
Why Is There a Global Chip Shortage?
This shortage has been warming up for some years, it did not just happen. Before the pandemic that brought the world to a halt, chip manufacturers faced the pressure of increased demand due to 5G. Also, the US government stopped selling semiconductors to Huawei, a Chinese firm. As a result, other chip manufacturers outside the States received massive orders from the company.
Additionally, other complexities, though less obvious, have hampered the distribution of some components. For instance, manufacturers use either 300mm or 200mm wafers to produce chips. The large wafers cost more and are used in more advanced machines. But there is a high demand for less expensive chips, making the 200mm more preferred than ever.
In 2020, there was a projection about chip shortage, which was partly because of the unavailability of equipment to manufacture 200mm wafers. With the onset of COVID-19, demand started fluctuating and gave rise to advanced ordering and stockpiling of chips by certain tech firms. As a result, other companies struggled to get the components.
Furthermore, people had to work from home because of the lockdown, so they needed webcams, laptops, and tablets. But chip factories stopped operations during lockdown and consumers struggled to get the exact device spec they wanted. However, manufacturers are catching up with the demand.
But we must know that the lockdown was not the major reason for the global chip shortage. Perhaps, it was the last straw that broke the camel’s back. First, Texas experienced a winter storm that led to the shutdown of semiconductor factories (click on https://www.bbc.com/news/technology-56114503 to read more). Second, a Japanese plant caught fire, which also caused a similar delay.
Some shortfalls in logistics are further compounding the problem. For instance, shipping costs were not much of a concern for most tech companies because they produce small-sized products. Also, many of those products could fit into one forty feet container. But in recent times, shipping costs have ballooned accompanied by an increase in air freight costs and shortage of lorry drivers in Europe.
In summary, the pandemic worsened a situation that was already precarious for chip manufacturers. We are experiencing a technology boom and supply cannot keep up. Also, the situation will not be resolved overnight. This means different things to different people such as gamers and car enthusiasts who will experience disappointments and delays for some months.
Bridging the Global Chip Production Gap
During the pandemic, there was a need for an environment where people would not have to make contact before they can do business. Most companies relied on digital tools to stay afloat and employee and client interactions happened virtually. Meanwhile, companies that couldn’t accommodate this necessity risked failure.
Although the transformation saved several businesses from going bankrupt, it led to some unplanned consequences such as the ongoing disruption in the supply chain. A breach in the supply chain could lead to catastrophic losses whether it was due to the pandemic, natural and human disasters, cyber breaches, or harsh weather. To mitigate losses, a supply chain should have solid technology solutions.
IoT could be the lead to the solution that we seek. The internet of things is a chain of interactions happening between networks, analytics, data, apps, actuators, sensors, and devices. In a few years, the industry may skyrocket in areas like devices for smart homes, space, military, cars, wearables, and medicals.
Originally, IoT was used in CNC machines, HVAC equipment, and air compressors. Now, manufacturers utilize it in machines that use actuators and sensors as well as robotics. Using the internet of things for data collection and analysis is a major pointer to avoiding disruption in the supply chain before it even happens.
A fabrication or manufacturing plant that is fitted with smart equipment, connected to share data, can communicate analysis in real-time to plant managers, operators, and QC personnel. To establish this line of communication, companies can connect devices that support actuators and sensors to multi-cloud workspaces and on-premises.
Data analysis from the back-end of those devices will help managers make wise decisions. This will reduce the waste of limited resources and improve the quality of products as well as their delivery. It will also make companies more resilient when there are disruptions in supply chains.
Therefore, by integrating the internet of things with business systems and workflows, companies can view the entire supply chain analytics on the go. An IoT chip distributor can achieve this by infusing a heterogeneous system, sensor, and software into the centralized view of the management.
This visibility gives the chip distributor the platform to effectively utilize data, analyze, and act on information that was formerly domiciled in applications. The analytics offer detailed insights into inventory, scheduling, production, and forecasting demand along supply chains.
Controlling the entire supply chain is quite overwhelming, but accessing the right data set in a single format can help managers to make fast decisions. Different conduits with one view collate data from various sources, including IoT assets, customer relationship management, and enterprise resource planning.
This explains how an IoT chip distributor should operate. The pattern provides unified visibility to plan, anticipate, and refurbish elements of the supply chain and at the appropriate time. A distributor should be able to holistically analyze how business operations will perform in real-time, from the status of their manufacturing equipment, inventory, to shipping.