As Airtame customers return to work/school, our sales team is experiencing a spike in demand. At the same time, due to Covid-19 effects on the technology hardware manufacturing industry, our supply chain is affected by the global shortage of semiconductors. The result is an increase in Airtame product lead times. This article provides some additional insight into the semiconductor crisis, what Airtame has done and is currently doing to minimize the impact on our end customers.
What is a semiconductor?
Semiconductors, also known as ‘semis’ or ‘chips’ are essential parts of modern electronics devices, including the Airtame 2 and Airtame accessories. Complex electronic devices like Airtame contain hundreds or even thousands of components from a large number of vendors.
What is causing this shortage?
The shortage of semiconductors can be tied to the industry trend of maintaining efficient supply chains leading up to the pandemic, geopolitical influence on supply and demand, timing of the introduction of new technology nodes, and of course the Covid-19 pandemic itself.
Due to the economic uncertainty, production was scaled back. At the same time, people started investing heavily into their 'work from home' setup, which meant more webcams, laptops, iPads etc. Many companies also invested in the work from home setups for their employees, and equipment at their offices to adapt to the new normal as the pandemic raged on with no end in sight.
Once the initial months of the pandemic passed, some industries such as personal computers (PCs), gaming equipment, monitors and home electronics saw extreme increases in demand that had not been anticipated.
Customers were sitting at home and upgrading equipment with the extra money in their bank accounts that was not being spent on usual expenditures such as vacation, travel, restaurants, etc.
Worldwide PC shipments totalled 79.4 million units in the fourth quarter of 2020, a 10.7% increase from the fourth quarter of 2019, according to preliminary results by Gartner, Inc.(Gartner - Gartner Says Worldwide PC Shipments Grew 10.7% in Fourth Quarter of 2020 and 4.8% for the Year)
In addition, automakers, who are using exponentially more semiconductors/electronics in modern car designs, underestimated the demand for cars in the second quarter of 2020, and further spiked the market demand for chips, when they increased their production forecasts to meet this consumer pressure.
This effectively increased competition between tech giants and automakers for the limited number of chips available, and created a situation where, in late 2020, electronics companies worldwide began to experience extreme cases of material shortages, increased prices, and longer lead times.
Semiconductor chips are extremely complex to manufacture, and building new factories to increase the supply takes billion dollar investments, and 2+ years to build the necessary production capacity. The timing of the pandemic coincided with the introduction of new technology nodes (more efficient methods of production and new chip designs), and many companies used the period of time with lower demand to invest in new product designs that utilise these technology improvements. This investment on the behalf of companies resulted in an accelerated demand for new technology nodes in mass production, before the capacity could be built up, despite investments being made in time.
Global political sentiments and import regulations also influenced the demand predictions and production capacity of manufacturers in the time leading up to, and during the pandemic.
On top of this, several vendors experienced manufacturing disruptions due to unprecedented natural disasters which just added on top of the issue.
All of the combined factors mentioned above have resulted in this global semiconductor shortage situation, which is creating significant, bullwhip effects through the entire supply chain network.
Who is being impacted by this?
Airtame is long from being the only company that has been impacted by material shortages in global supply chains. Currently there are many gaming and car companies, as well as electronics manufacturers that are working hard to handle shortages and prevent production lines from sitting idle.
Experts are predicting that in 2021, 1,5-5 million fewer cars will be produced, purely due to lack of microchips. Samsung even dropped the launch of their next generation Galaxy Note smartphone due to this semiconductor crisis, and their inability to secure sufficient components to produce according to demand for this new product. (Industry week - Chip Shortage Could Cut US Vehicle Production by More than a Million, AAI Warns)
Consumers have started to experience the situation in the market as well. Increases in both lead times and prices are commonplace, for example with the Playstation 5.
What are we doing to mitigate the impact on customers?
The specific performance capabilities of some of our semiconductor chips and our custom hardware design are core to the Airtame product experience. Therefore, our supply chain, logistics, and support teams are diligently working together with our key partners to source the necessary components, manufacture Airtame products and get them ready for shipment to our customers.
We are proactively mitigating the risk in our supply chain by leveraging multiple channels for material sourcing, buffering fluctuations in supply and demand where possible, while at the same time minimising waste.
There will always be some uncontrollable delays due to market conditions - unannounced increased lead times of critical parts, sustained demand overwhelming shipping carriers, and critical congestion at major shipping ports (referring to shipping manufacturing components).
Despite these challenges, our team is proud to say that our supply chain has performed exceptionally well during this time, and has proven to be both robust and flexible.
What does this mean for Airtame customers?
It is unfortunately not possible to completely protect our customers from this challenging market situation, which means that the orders for Airtame products that have been placed take a slightly longer time to move through our supply chain.
We expect all orders placed from April 2021 and onwards will have a lead time of 1+ months, depending on the order timing and the size of the order.
We appreciate your patience and understanding that we are doing everything we can to get the products in our customers' hands as fast as possible.