A shortage of computer chips is keeping CIOs and other tech leaders scrambling to find a solution. The chip shortage has been attributed to the growing demand for artificial intelligence, which requires more and more computing power.
The when will chip shortage end is a question that many technology leaders are struggling with. Chip shortages have been plaguing the industry for months and it doesn’t seem like the issue will be resolved anytime soon.
The worldwide computer-chip scarcity is delaying orders and increasing costs for laptops, printers, cellphones, videoconferencing equipment, and other work gear, according to corporate technology executives.
According to them, many of these companies are under increased pressure to update computer technology as they prepare to reopen their physical offices, as well as continuing to provide business-grade mobile tools to remote workers.
Sue Workman, chief information officer at Case Western Reserve University in Cleveland, stated, “We’re seeing 10- to 12-week delivery delays for laptops and computer equipment.” “It used to take a day or two for those.”
According to Ms. Workman, the school is working hard to equip classrooms with video screens, microphones, and other equipment in time for the next fall semester so students may take certain courses from home. She noted that orders for both displays and microphones had been delayed.
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She said that in the past, IT resellers that package software applications with computer hardware, known as value-added resellers, or VARs, were able to cover unforeseen supply shortages for laptops and other devices.
She said, “They’re out, too.” “They don’t have any inventory,” says the narrator.
Other businesses are experiencing the impact of the scarcity on their corporate clients. Customers in industries such as automotive and telecommunications are experiencing shortages, according to TransUnion, a Chicago-based company that offers credit-check studies for more than 60,000 companies.
TransUnion’s chief information and technology officer, Abhi Dhar, said, “We’re experiencing some supply-chain issues.” “We see it in the marketplace, and our consumers notice it as well.”
Internally, Mr. Dhar said, the company’s IT partners have helped shore up IT requirements when issues have arisen.
“It’s impacting our supply chain, which is paradoxically making us better at something we should be better at anyway: predicting where infrastructure will be needed,” he added. TransUnion is transitioning its operations to the cloud. He said, “We can’t simply keep purchasing it.”
The global chip shortfall, which comes amid rising costs for silicon wafers and the polymers and metals needed in their production, is rippling across supply chains from schools to financial companies to grocery shops. According to industry experts, it is forcing tech-hardware makers to shut down facilities, suppliers to put orders on hold, and it has placed corporate IT clients in limbo.
According to Mario Morales, group vice president for enabling technologies and semiconductors at industry research firm International Data Corp., chief information officers and other tech leaders are dealing with dwindling supplies of the physical building blocks of IT, such as liquid crystal displays, images sensors, integrated circuits, and processors, across the economy.
Mr. Morales said, “Suppliers are working at full capacity and are not anticipated to catch up until the end of this year.”
Large global chipmakers, such as Intel Corp. and Taiwan Semiconductor Manufacturing Co., have announced plans to expand manufacturing capacity to meet rising demand, but some of that capacity will not be ready for another two years. Intel’s top executive, Pat Gelsinger, warned last month that the chip shortfall may last until 2023.
Plantronics Inc., a Santa Cruz, Calif.-based business that manufactures high-end headsets and speakers for corporate videoconferencing and collaboration tools, has just begun making orders for computer chips more than a year in advance, according to Chief Executive Dave Shull.
Mr. Shull noted that only a few weeks ago, a longstanding integrated circuits supplier had to cancel a supply due to a shortage of raw materials. Due to setbacks like these, Plantronics’ plant in Mexico has delayed production, leaving CIOs at Fortune 500 companies waiting in the wings.
Jason Eichenholz, Luminar Technologies’ chief technical officer, in a 2017 picture.
Ben Margot/Associated Press photo
Mr. Shull said, “Everything we send out has chips in it.” “However, demand exceeds supply.”
He said the firm, which goes by the name Poly, hasn’t raised pricing yet because it’s looking for “second or third sources for choices” while it scours the market for “second or third sources for options.”
Luminar Technologies Inc., headquartered in Orlando, Fla., manufactures optical sensors for self-driving vehicles. Last month, the company announced intentions to buy OptoGration Inc., one of its longstanding semiconductor suppliers, in a move to become less dependent on the worldwide market. Black Forest Engineering, Luminar’s chip-design company, was purchased four years ago. The terms of the agreements were not made public.
Luminar will ensure a supply of approximately one million chips per year with the acquisition of OptoGration, which is scheduled to complete in the third quarter, according to the firm.
Though the company’s original discussions with OptoGration predated the current chip scarcity, the current condition of the market aided the deal’s progress, according to Jason Eichenholz, co-founder and chief technical officer.
Mr. Eichenholz said, “We create these systems from the chips up.” However, since the company’s highly tailored chips will be manufactured in-house, Luminar will be immune to the worldwide shortage.
He said, “It’s not anything I’m concerned about.” “I’m not expecting another manufacturer to come in and take my chips.”
The speed with which we can drive a vehicle off the lot or purchase a new laptop is being hampered by a worldwide chip scarcity. The Wall Street Journal visits a fabrication facility in Singapore to learn about the complicated process of chip manufacturing and how one company is attempting to solve the shortfall. Photo courtesy of The Wall Street Journal’s Edwin Cheng.
—This essay was written with the help of Agam Shah.
Angus Loten can be reached at [email protected]
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