The Pandemic’s Effect on Semiconductor Supply and the IT Industry

Even though COVID-19 restrictions have been lifted, the effects of the pandemic on the global supply chain still linger. Before the pandemic, ordering a laptop was simple as it would arrive at its destination within a day or two after ordering.

Due to supply chain issues and a shortage of semiconductors (also called chips) this has resulted in massive delays where it could take several months. These delays don’t seem to be getting better though and here is why that’s happening.

First, Factories In Taiwan And Korea Are Shutting Down

Most chips are manufactured in Taiwan and Korea and are what keep the supply afloat. Because COVID-19 resulted in shutdowns across the world, factories making the chips were shut down periodically during the pandemic.

The other issue with the manufacturing of these semiconductors is that it involves more than one individual or machine to make them. They are expensive to make and are complex compared to other items. There are several steps that must be taken, and those steps result in multiple days and involve teams to finish these items.

There are massive investments being made to build new foundries, but those will take time to become operational. These foundries cost billions of dollars and require years to construct.

Second, The Explosive Demand For Electronics

The pandemic forced people to stay inside at all times for long periods of time. This naturally lead to consumers getting bored and finding ways to entertain themselves. There was a spike in purchasing various gadgets, technology and network equipment.

This brought forth a massive demand for chips – which are required for all devices. Paired with the factories being shut down, companies had ever-growing backlogs of orders. A much higher demand was created and the supply wasn’t able to keep up.

Third, A Reduced Capacity At Ports In China And The US

Because of lock downs – or workers getting sick with COVID-19 and quarantining – there were less dock workers. On top of the large waiting list of orders for technology, there were long queues of container ships full of products that were waiting to unload. The unloading process lasted for 10 days or more.

Fourth, A Lack Of Shipping Containers

Finally, all of this was compounded by the fact that the shipping companies also had a lack of shipping containers. This wasn’t for a lack of supply, but rather that shipping companies were focusing on providing PPE to countries who had low exports overall. This resulted in many companies paying to ship empty containers or leaving them to idle.

What Does This Mean For The IT Industry?

What this means is that there is a huge need now for businesses to work with vendors and create longer term plans for hardware needs. To mitigate the effects of delivery delays, businesses should determine what their needs are and plan orders months in advance.

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