Welcome to our third edition for 2021. Whilst researching content for this eZine, the original focus was on the subject of Ransomware and the associated risk to businesses in South Africa, as well as mitigating strategies around your data protection and disaster recovery.
However, we need to look at a much more pressing issue rearing its head, which is the global shortage of semiconductor chips and how this may affect your business and the economy for the next 12 to 18 months.
The severity of the global chip shortage will affect millions of people in the coming months, owing to the fact that just about every appliance we use, incorporate them. From your smartphone, tv, dishwasher, car right thru to the toothbrush and microwave oven that you use on a daily basis.
US sanctions has forced Chinese companies to start stockpiling chips for their own consumption which has had a knock-on effect for supply chains in the rest of the world. Both Samsung and LG last week announced that display production challenges will affect stock supplies to distributors and resellers.
The shortfall in semiconductor chips may force Samsung to delay the worldwide launch of their new Galaxy Note smartphone until the imbalance in supply and demand has abated.
The automotive industry relies on chips for their car navigation and engine management systems, right thru to driver assistance systems and infotainment. Last week Ford, Jaguar Land Rover and Volkswagen announced that they will be curtailing production, shutting down factories and decreasing their workforces owing to the unavailability of computer chips.
Richard Palmer, the CFO of the merged entity of Fiat, Chrysler & Peugeot predicts that the shortage will last to well into 2022. Other car makers such as Nissan have announced that they will be leaving out high-end features such as satellite navigation, from their current production runs whilst Renault reportedly will stop using large format digital display screens in the dashboards of their premium vehicles.
The car rental industry has also been affected in that companies such as Hertz cannot find enough stock to replenish their rental fleets. Owing to this, they are now forced to purchase low mileage, pre-owned vehicles for the first time.
Countries with big IT industries, such as the USA and China are being forced to rethink how production of chips can be increased. The European Commission, which is the executive arm of the EU has announced that they will start building their own chip manufacturing capacity in an effort to be more self-reliant in the future on what it sees as critical technology.
Europe only accounts for about 10% of global chip manufacturing but wants to grow that to 20%. Intel has announced that it will invest more than USD 20 Billion in two new chip factories in Arizona to meet rising demand, but it will take 2 to 3 years to complete these production plants.
What all of this means for us in South Africa is that supply constraints will have a ripple effect thru the entire IT industry. We are already starting to see this in notebook and screen stock shortages, but also a marked increase in prices for items such as hard drives, GPUs (should this not be CPU’S? not GPU’s?) and memory chips.
Even at an enterprise layer, data centre products’ lead times have increased from the normal 4-6 weeks to on average 8-12 weeks for all vendors, including Dell, HP and Lenovo.
It is well worth to consider the above when mapping out lead times for capex projects and infrastructure upgrades in the remainder of the year. Lock down the required stock early and take advantage of a strong Rand/Dollar exchange rate before price increases start filtering down from overseas suppliers.
Please do not hesitate to contact your account manager or myself directly to assist you in this regard and thank you for your continued support.
Johan de Villiers
First Technology Western Cape