Global semiconductor chip shortage highlights supply chains’ vulnerability
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By: Krypt Team - September 24th, 2021

Authored by: Vijendra Kargudri

Dependency on a semiconductor chip

It wouldn’t be an understatement to say that modern life is dependent on a semiconductor or micro-chip! From our daily use of mobile phones, laptops, smart TVs, micro ovens, printers, automobiles to the most advanced airplanes. Everything depends on a semiconductor to function.

The semiconductor crisis has hit companies across industries around the world. Without signs of recovery any time soon, the impact on supply chains across various industries will continue.

Semiconductor market hit by multiple shockwaves

The semi-conductor supply chains were first shaken by the pandemic. The world went into a complete lockdown, travel was banned and businesses were shut down. All works from offices moved to the home as people were required to stay home. The pandemic caused demands for laptops and tablets, TVs, etc., to skyrocket. A complete departure from a traditional semiconductor cycle. Apart from the pandemic, the trade wars, fires, droughts, and floods have contributed to the shortage of semiconductors.

It is a known fact that every industry is either enabled by or dependent upon semiconductors. Not a single industry exists without a positive influence on semiconductors. In normal times the boom and the bust would have been smooth. But the pandemic along with heavy reliance on lean inventory collectively created the havoc that various manufacturing industries face today due to this shortage.”

Impact on Future Market

Auto giants have warned that the global shortage of semiconductors affecting car production would worsen over the next six months. Intel CEO Pat Gelsinger maintains that the global chip shortage will continue to worsen for the time being. While the industry experts forecast to endure a worsening situation throughout the second half of 2021, some even predict it could last up to 2023!

Automobiles depend on semiconductors that direct & manage the engine performance, safety features, navigation, and entertainment system. A typical modern car can have anywhere from 1,500 to 3,000 chips.

This has seen a surge in the used car marketplace. Due to the semiconductor chip shortage, new car buyers are turning to alternatives used cars, and readily paying higher prices for them. Staying home and not traveling, people suddenly have disposable income and are ready to buy new cars. And, even if they are able to pay a large sum of money, certain new cars aren’t available right now.

Rattled Supply Chains

The Ever Given’s blockage of the Suez Canal shone a spotlight on global supply chains in ways never imagined. There are many organizations yet to fully recover from the impact of the blockage of the Suez Canal and transact essential supplies.

The new way of thinking during this chip shortage is – if you don’t have it in stock, you don’t have it. As such companies will run higher risks of being shut down for prolonged periods of time. The lesson learned is that the only way to succeed is to buy way out in front of demand to secure what is needed from the supply chain. In such unprecedented times, companies need to buy well in advance, more than they previously operated at to skim past this shortage.

Given the amount of strain and the lack of buffer in global supply chains, it’s almost inevitable there could be another disruption event in the coming months or years.

This only warrants businesses to make sure their supply chains are agile and ready to respond in real-time. They ought to make smart investments before it is too late!

How can Krypt help you?

Krypt is a ‘one-stop shop’ for supply chain & global trade solutions with a global footprint. Our in-house solutions and pre-packed solutions for SAP TM, SAP IBP, SAP EWM, and SAP GTSare an outcome of our long-term innovation, technology know-how, and sustained customer engagement across 35 countries.

Our team of SAP TM & EWM experts can help you with a rapid & cost-effective integration/implementation of SAP TM and EWM, respectively across disparate systems of your supply chains.

If you wish to know more, please request a free demo or contact us.

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Image Credit: Pixabay

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