The issue of chip shortage in the technology industry

The chip shortage has been a problem for the technology industry since the beginning of 2020 and is predicted to continue well into 2023.

Increased design complexity, talent shortages, supply issues, and geopolitical conflicts are resulting in product lead times of six months or more, even with fabs operating at full capacity.

So, what solutions lie ahead?

Find solutions now to the tech chip shortage

Like most, the chip industry is an interconnected ecosystem dependent on each aspect of its supply chain, with each issue needing different solutions. Short-term solutions include coordination, reformatting, and software upgrades. Longer-term solutions include expanding production and suppliers, increasing research and development, and boosting resilience.

Coordinate and collaborate with key players

With multiple moving parts throughout, coordination is key. High specialisation across multiple geographies means further complexity in supply chains, long lead time on key activities and manufacturing, and high levels of specified design. With even one component missing, the end-product cannot work. By collaborating and co-engineering with other key players, companies can expand their design and manufacturing centres, attract more talent, and obtain more development ability. This allows for cost-saving ventures, as well as more streamlined coordination with previously untapped stakeholders.

Redesign and reformat old chip technology

“In with the new, out with the old”. This adage is one often fitting for many industries, but in the case of tech, it often isn’t. Many companies and manufacturers should look into accommodating older chip technologies, both in production and in engineering. “Used” or “old” chips and older equipment means the ability to reformat chips from an “earlier” generation, allowing manufacturers to use them in new devices.

Prioritise software upgrades

Machines can learn and adapt through software solutions and upgrades; however, this has rarely been prioritised in the industry. This could be due to the high level of intricacy needed to accomplish crucial processes. The same chip found in different products, such as a computer, an interactive home device, and a phone, all run on different software. This adds complexity to creating software to work with the chip. By moving towards programmable logic ICs, software can play a key role in upgrading existing chips.

Plan for the future to get ahead of the chip shortage

Companies can also investigate longer-term solutions, like expanding chip production and adjusting focus within research and development.

Expand production

Increasing output isn’t a short-term solution, but a long-term one. Fab construction is time consuming as well as costly, usually requiring three years to build. However, many countries are supporting this. With heavy investments in the industry, a 50% increase noted in 2022, increasing volume of production is expected in the long-term, which will allow for more resilience and agility within production.

Increase research and development

Research and development in the chip industry can be very time consuming with extensive work and long timelines. Prior to the current predicament the industry is facing, this hasn’t been an issue, but the current situation has highlighted a need for more capacity for R&D areas dedicated to looking at adapting to supply volatility. This would help bottlenecks and crunches in local markets as well as global markets, increasing supply chain resilience and stronger brand positioning.

In an industry that is becoming more and more aware of its need for agility, flexibility, and resilience, expanding and reworking strategies within research and development will allow companies to be prepared to upscale and downscale resource supply, production, and product allocation, and strengthen pricing strategies.

By redesigning the overall design, companies can reduce the number of specialised components and redesign to use more commonly found components and materials.

Address the chip shortage with supply chain solutions

Another key area is supply chain solutions. By adding more resilience and agility to company supply chains, companies can better weather situations like this.

Expand supplier base

A key area of the supply chain that will need widening is the supplier base. Companies can ensure that they have multi-sourcing options, so resources can be supplied from different regions and areas, ensuring that should one area be affected by closures, delays, or other issues, companies can lean heavier on other suppliers.

Boost supply chain resilience

As supply chains become more and more intricate, partnering with an integrated end-to-end logistics partner will bring more ease. Contingency plans must be in place for when issues arise in the different components of the supply chain. This is where a truly integrated logistics partner will be beneficial, offering more visibility of the overall supply chain and individual areas, as well as ensuring solutions are created quickly to address issues. A partnership will allow for more flexibility and agility overall, but especially in production and sales.

The above-mentioned solutions can assist companies in chipping away at the bottlenecking issues in the semiconductor industry, applied separately or together, offering more resilience and reliability in the technology industry.