The Microshare Blog: Supply chains, chip and sensor shortages: Surviving the crunch

Supply chains, chip and sensor shortages: Surviving the crunch

By Charles Paumelle

Beginning with the onset of the global pandemic in March 2020, massive disruptions to global supply chains of all kinds began making headlines. Focused at first on medical equipment and so-called PPE, the disruptions quickly spread to global manufacturing, particularly those products requiring silicon chips, semiconductors and other digital and electronic components. These problems have multiple causes, including the shutdowns early in 2020 of factories producing key components in China’s Wuhan province, the source of the pandemic. But other things exacerbated the shortages, including:

• fires at key manufacturing plants in Taiwan and Japan;
• the COVID-related explosion of demand for work-related technology caused by lockdowns
• enormous backlogs and cost increases in air freight as fewer commercial air flights led to capacity problems;
•  a shortage globally of shipping containers;
•  a deteriorating trade relationship between the US and China;
• complex tariff and licensing troubles caused by the UK’s split from the European Union (BREXIT);
• and even a short but dramatic blockage of the Suez Canal after the accidental grounding of the world’s largest cargo ships.

To put the global picture in perspective, the shortage of silicon chips forced Apple to delay the launch of its iPhone 12; it caused Nissan and General Motors to shut down production at two auto plants in northern Mexico; Huawei, embroiled in a dispute over the security of its 5G network with the United States, has added to the crunch by stockpiling massive quantities of chips in case US pressure cut the company off from global chip market. Bottom line, this means deliveries of many key components of the digital world are delayed.

The impact on IoT sensors

The impact on major industries has been significant and the shortage of semiconductors is not expected to end soon. Some companies – Intel, for instance in the US, TSMC (Taiwan) and Samsung (South Korea) – have vowed to expand manufacturing facilities and to locate more manufacturing near their largest markets, including the US and EU. This is an echo of other supply chains strained during the pandemic, especially masks and vaccine production, where bringing production “home” has become a common vow. 

For IoT, these developments are ironic. For years IoT deployments have been making supply chains more efficient. Yet that also means they are run on a  “just in time” basis, causing any disruption to ripple throughout any given system. For the sensors required in the Smart Facilities work that Microshare does, this has meant very long lead times for sensor deliveries. 

The supply chain crunch has not spared IoT. From the Microshare vantage point, we’re seeing backlogs of up to a half year on some key elements, and several months on previously ample components like Bluetooth sensors. 

Eventually the shortages of semiconductors and other components will be addressed. Market logic suggests that in manufacturing hubs like Southeast Asia, northern Mexico and eastern Europe, smart businesspeople see the opportunity here to address a gaping need – and to shorten vulnerable supply chains feeding big markets like North America or the EU.

But logistics experts believe the shortages will persist throughout 2021. The only solace to take away is the fact that the shortages affect everyone, and that the complex and varied causes are global rather than a reflection of mistakes or failings of any particular industry. 

Charles Paumelle is Chief Product Officer and a Co-Founder at Microshare.