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Supply bottlenecks and a shortage of chips? We have the answer!

 

Months of waiting for the new laptop or the much needed phone for the office? Automobile manufacturers are cutting back on production, telecommunications companies are gradually running out of routers, and “gamers” are not getting the latest game consoles. A study conducted by the “Leibniz-Institut für Wirtschaftsforschung an der Universität München e. V. (ifo Institut)” determined that, four out of five manufacturers of electronic products in Germany are currently unable to keep up with production. However, not only consumers but also companies are feeling the consequences of this more and more clearly. The effects of faltering supply chains and missing components have now reached a wide range of industries. Particular attention is being paid to the current chip shortage, which is causing significant supply bottlenecks in the semiconductor industry. But what does this mean in concrete terms for small and medium-sized enterprises and which products are affected?

The role of chips in the IT industry

Roughly speaking, chips are integrated circuits (ICs) on a very thin semiconductor material. Nowadays these can comprise billions of electronic components, so that highly complex microprocessors and memory chips are housed on semiconductor wafers just a few square millimetres. Chips function as storage, computing and control units and are therefore an integral part of modern network hardware.

The reasons for the supply bottleneck - no quick solution in sight!

There are various reasons for the supply problems in the semiconductor industry. Despite their small size, the production of microchips cannot simply be ramped up, because semiconductors are subject to an expiration date that is scarcely known. Moreover, this is a complex quality product that cannot simply be produced more quickly despite demand. The probability of errors would increase and a defective chip cannot be corrected but must be disposed of. Thus, it has always been true that anyone who needs microchips has to order early to ensure timely delivery.

The most important raw material of a microchip is silicon. Although this semi-metal is abundant on earth, five million tonnes out of a total of eight million tonnes were produced in China in 2020. The manufacturing process is energy-intensive, as quartz has to be melted at high temperatures. Problems in the power supply and rising energy prices have led to a reduction in production in the raw materials industry. The dependence of the semiconductor industry on Chinese silicon production became clear - explains Jost Wübbeke, director of Sinolytics, an analysis and consulting firm specialising in China.

While the raw material became scarcer, chip demand also changed during the same period. In the automotive industry, for example, chip demand declined as car sales plummeted in the short term. Chip manufacturers found new sources of sales in information and communication technology and consumer electronics. The consulting firm Sinolytics mentioned above sees this as the main reason for the current shortage of semiconductor components. In addition, sales of end devices have increased due to the pandemic, because home office and distance learning have caused an acute need for network technology.

The strict lockdown by the authorities in Malaysia is also putting a strain on Germany's largest semiconductor manufacturer, Infineon Technologies AG, and provides another reason for the worldwide supply bottleneck. In addition, the group suffered months of outages due to problems in the power supply after a storm in Texas. The US-Chinese trade war has further exacerbated the situation as orders have been placed with companies outside the People's Republic of China for politically motivated reasons. This has resulted in the intensification of shortages for end products that require an intact, global supply chain and the majority of whose raw materials come from China itself.

In addition to the already disrupted processes, there were other isolated events: The Chinese port of Ningbo-Zhoushan, which is the largest port in the world by cargo throughput, turned away ships in the summer of 2021 due to a covid case, further disrupting the global supply chain. China's Yantian port was already partially closed in June 2021 due to covid. "Global trade is stuck" was in the media when the transport ship "Ever Green" ran aground in the Suez Canal and blocked it. Each of these events means a disruption in the global supply chain and entails further consequences.

Consequences of the chip shortage

Comparison portals can access a broad database, reports Michael Stempin, price expert at “Idealo” in a report by “Welt am Sonntag”, that a significant price increase has been observed for many products in the electrical sector.

Due to the increased demand in the corona pandemic and the aforementioned mentioned bottlenecks in the semiconductor industry, companies are continuously working to adapt their logistics to the current circumstances. Delivery times of up to a year have to be accepted, whether in online trading or in electronics shops, both small and medium-sized companies in Europe are affected.

Routers, supervisor cards or line-ups - especially the market for these product groups, which rely on high-performance chips, cannot be adequately supplied by IT network equipment manufacturers. If individual network components or the entire required hardware cannot be procured again in the usual delivery time, service failures due to obsolete or defective network devices can also be the result. Likewise, new acquisitions often pose a new challenge for IT managers. Delivery times that are difficult to estimate and delayed can prolong or prevent digitisation projects - after all, hardly any company can manage without an available and reliably functioning IT infrastructure.

Refurbished network technology as an alternative

Burdened with worries about delivery bottlenecks of network hardware, the question arises what alternatives the market offers. Cybertrading GmbH has set up a modern and professional trading platform with its online shop it-market.com and offers a broad portfolio of high-quality IT products from leading international manufacturers. In response to the supply shortage, Cybertrading focuses on offering refurbished network hardware. In contrast to new devices, for which, for example, chips must first be produced, the semiconductor elements in refurbished network devices are already installed and the devices are available ready for use. In addition, Cybertrading can draw on a worldwide network of purchasing sources and thus meet better delivery times.

In addition to the advantage of protecting yourself from the consequences of a delivery bottleneck, the issue of sustainability also provides powerful reasons for refurbished network hardware. Compared to a new device that has to be delivered from far away and consumes resources during transport, refurbished network hardware at Cybertrading gets a second life - instead of being disposed of. To dispel any doubts about the reliability of the products, it-market.com also offers a warranty on refurbished network hardware.

Conclusion for your own company

Purchasing refurbished IT components not only pays off in terms of sustainability. Experts see a long-term problem in the chip shortage and refurbished network hardware offers a long-term solution beyond the current supply bottleneck.