The global supply chain issues caused by shortage of semiconductors and containers

Update on the rugged supply chain issues

In previous articles, we have written about the global shortage in both semiconductors and containers. These supply chain issues are still affecting the industry, delaying the deliveries of rugged computers. Here’s a quick update on where the situation stands today.

Status on the semiconductors

The consensus among the CEOs of big tech companies is that the shortage in semiconductors is likely to continue for 12 to 18 months from now. This will keep making it tough for the rugged computer industry and its supply chain issues. Having to compete with the giant Automakers of the world is not an easy task and they are desperate. Car manufacturers are looking at a combined revenue loss of $110 billion.

The president of IBM, Jim Whitehurst has a very gloomy outlook on the future, predicting that it will take years for the supply chain issues to disappear.

“There’s just a big lag between from when a technology is developed and when a fabrication plant goes into construction and when chips come out,”

Jim Whitehurst

On a more positive note, other major companies have predicted that the worst issues could be resolved within 6 months with some luck. One of the positive voices is Ciscos CEO. He thinks the short-term issues will take about 6 months and the rest will get better and better over the coming 12 – 18 months.

Building capacity to ease the semiconductor supply chain issues

Restarting chip production to pre-pandemic levels is in full swing and some players, like TSMC, have surpassed it. Most of the major companies plan to increase production but it’s going to take time.

The process of building a chip is extremely complex and manufacturing is possibly the most capital-intensive business on the planet. The intricate production requires specialized equipment and building new manufacturing plants will be a slow process.

The good news

Production of semiconductors has started to ramp up and the biggest company in the business is positive. The Taiwan Semiconductor Manufacturing Co (TSMC) has managed to increase its output by 60% compared to the lows during the pandemic.

This number should perhaps be put in contrast to the pre-pandemic levels of 2019. In this case, the production increase is around 30%. This is still impressive and should help relieve the supply chain issues.

TSMC intends to keep working on increasing its output and modernize the “Just-in-time” method they are currently using to prevent similar issues in the future.

Container supply chain issues

The container shortage does not seem to be resolved in the recent future either. Container space is hard to come by and delays are at an all-time high. At the same time, the ripples of the Suez Canal blockage is still being felt and the booming e-commerce business is putting on additional pressure.

All the pressure on the shipping industry has led to skyrocketing fees. The freight rate of a 40-foot container has increased threefold from $1486 in May 2020 to $5472 in May 2021. Meanwhile, the Panama Canal is planning an increased fee.

While there are enough shipping containers in the world they are still in the wrong place, essentially some harbors are full while others are empty. The supply chain issues have not been lessened by the way the shipping industry has handled things. 

The major problem now is that the carriers avoid the full ports due to the long time it takes to unload. Instead, they choose to unload in a port that’s close to empty. This means they will also leave without any empty containers. The full harbors remain full, empty containers remain in the wrong place and the container shortage keeps going.