Hard to procure electronics – why are they so expensive?
The price of electronics is skyrocketing, and it could very well be the new normal for the next few years.
Considering we are heavily involved in information technology, being a Managed Service Provider (MSP), we have encountered the hurdles that come with procurement and meeting customer expectations for supply/demand.
With every request, we work hard to ensure that each of our clients are receiving equipment and solutions that have been vetted and will be the ideal fix for whatever project is taking place within an organization. This means that we must also include transparency in what it means to need a new server or workstation ASAP, considering timelines have dramatically changed across the industry.
In this article we will discuss the rising costs in electronics, shortages in GPUs, lack of available shipping containers, and procurement delays due to high-demand hardware coming from outside the continental United States.
That’s right, delays. The dreaded word when organizing projects and implementing changes where you have promised your staff it would be a smooth and seamless transition.
So, what’s with the shortage of graphics processing units (GPUs)? Why can’t we just make more, and why are we experiencing such heavy delays? Why would that affect your organization? Most people that need a workstation capable of graphics rendering or design such as those in architecture, special effects, or anyone that deals with the need for high-resolution picture and video quality, will need a formidable GPU.
A GPU is both difficult to create, and not everyone is capable of doing it. Semiconductor fabrication facilities take both years to build and billions of dollars that not everyone has (King, et al, 2021).
“Manufacturing a chip typically takes more than three months and involves giant factories, dust-free rooms, multi-million-dollar machines, molten tin and lasers. The end goal is to transform wafers of silicon—an element extracted from plain sand—into a network of billions of tiny switches called transistors that form the basis of the circuitry that will eventually give a phone, computer, car, washing machine or satellite crucial capabilities.”
– Ian King, Adrian Leung & Demetrios Pogkas
Now, if we were doing fine before, why is it going to take so long to get back to normal?
Many chips are manufactured outside of the Continental U.S., and while the global COVID pandemic wrought havoc on workplaces, it prevented many factories from resuming standard working conditions. Output is affected when employees are unable to come in and operate the necessary machinery or perform the proper operational checks to products. Some plants where chips are manufactured in other countries were closed and work was halted, crippling supply. The wait for replacement parts and products is up to six months (Hopkins, 2021).
What does this mean?
Due to the lack of GPU availability, manufacturers such as Dell, HP and Lenovo all informed consumers that prices are expected to rise for the foreseeable future. Check out this site for more details!
This means that holding out and waiting for prices to drop again may just leave you blue in the face and without necessary electronics.
CNBC News revealed that the global chip shortage is likely to last through 2023. Therefore, planning projects in advance is going to have to be the new normal, considering last minute orders and unprepared implementations are going to have a waitlist time at a minimum of 6 months.
Because of Taiwan Semiconductor Manufacturing Company’s (TSMC) advantageous climb to catch up with backorders of chip manufacturing, the industry is expected to continue with delays. Both European chip manufacturing companies and those on the East coast in the U.S. are still feeling the squeeze of demand.
Reasons for Inflation
Not only are the chips necessary for many high-demand electronics running in short supply, so are the shipping containers for transporting these valued items. The cease of product development during the COVID pandemic caused cargo ships to severely reduce the number of containers going out for import and export. This was heavily felt when trade between Asian countries and the United States were halted due to restrictions (Youd, 2021).
To put it bluntly, chip shortage = high prices.
According to Wired.com [hyperlink to direct source], there is an electronics price increase of up to 30% as a result of the chip manufacturing shortage. That’s high, and likely unbudgeted for within many IT Departments. Now is the time to refocus efforts if your organization is planning to continue taking advantage of working from home and remote meetings.
Even though companies are willing to spend the extra cash to get the equipment they need, many suppliers—even Apple—have admitted to losing out on billions of dollars due to the inability to meet demand due to the chip shortage (Fickenscher, 2021). From appliances, to cars, to anything with a screen built into it, costs are going to continue to climb and shortages are to be expected.
Our best advice to you?
Plan in advance. Plan on waiting. Plan on paying a little more for your servers and computers, and be patient with suppliers as they work hard to normalize the industry that is taking the globe by force with the desire to reconnect and function in a remote society.
Hopkins, John L. (2021, June 8). GCN. Yes, the global microchip shortage is COVID’s fault. No, it won’t end any time soon. Retrieved from https://gcn.com/articles/2021/06/08/covid-microchip-shortage.aspx
King, Ian & Leung, Adrian & Pogkas, Demetrios (2021, May 5). Bloomberg. The Chip Shortages Just Keeps Getting Worse. Why Can’t We Just Make More? Retrieved from https://www.bloomberg.com/graphics/2021-chip-production-why-hard-to-make-semiconductors/
Knight, Will (2021, May 13). Wired. The Chip Shortage Is Driving Up Tech Price—Starting With TVs. Retrieved from https://www.wired.com/story/chip-shortage-electronics-prices-tvs-displays/
Fickenscher, Lisa (2021, May 6). NY Post. Consumers getting socked with higher prices—and it could last months of years. Retrieved from https://nypost.com/2021/05/06/consumers-to-get-socked-with-higher-prices-in-2021/
Shead, Sam (2021, May 13). CNBC News. The global chip shortage could last until 2023. Retrieved from https://www.cnbc.com/2021/05/12/the-global-chip-shortage-could-last-until-2023-.html
Youd, Frankie (2021, April 29). Ship Technology. Global shipping container shortage: the story so far. Retrieved from https://www.ship-technology.com/features/global-shipping-container-shortage-the-story-so-far/
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