CARL ASKS: Is there really a semiconductor supply issue?

CARL ASKS: Is there really a semiconductor supply issue?

Container ship

THE QUESTION: Is there really a component supply issue from China and the Far East?

THE ANSWER: It would appear so. I contacted a number of members of the British Security Industry Association (BSIA) Security Equipment Manufacturer's Section (SEMS) and asked them for their personal experience. Their responses made for grim reading.

'Chips', radio modules and other key components used in the security industry are in short supply. Lead times are now running out to 40 - 52 weeks with many component manufacturers demanding payment with order.

Supply and demand issues have seen the cost of some components rocket to 10 - 20 times their usual price. Proof if proof were needed that businesses in the Far East practice a unique blend of Confucius and rampant capitalism.

Ironically, demand for semiconductors actually fell in 2018/19. 2020 saw a modest increase in sales and then 2021 saw an explosion in demand with sales up over 25% on the previous year.

To say that COVID has exacerbated the situation is something of an understatement. But it is not the only factor affecting supply.

A drought in Taiwan left TSMC, one of the world's largest semiconductor manufacturers, short of water that was needed for the production process. Power cuts in China and fires in production facilities have added to problems. This was all pretty well topped off by some ham-fisted boat driver attempting to parallel park his massive container ship in the Suez Canal.

Wallet with dollar notes

Of course, sourcing components is one issue. Transporting them from China and the Far East is quite another. I saw a quote for a few pallet loads of machinery (groupage). To ship from the UK to Taiwan would have cost $1,200. However, to ship the same consignment from Taiwan to the UK will cost $6,000. Colleagues have told me that they are receiving quotes of between $14,500 and $16,500 to ship a 40-foot container from Chinese parts into Europe.

As I contemplate those poor production managers reaching for another box of tissues I wonder when will this problem end. And the news is not good. Demand for semiconductors is likely to increase as more manufactured products become digital. Manufacturers in the Far East are investing mammoth sums, literally billions of dollars. The US is said to be dedicating somewhere in the region of $75 billion and the dear old UK is chucking a few tens of millions at the Welsh version of Silicon Valley.

Experts predict the situation will be back under control by the end of the year. Less optimistic types think it may be as late as 2023 before demand is fully met. But then how long before all this increased capacity is used up? Fortunately, that's a discussion for someone way above my pay grade.

Carl Gibbard

Carl Gibbard was co-founder of Concept Smoke Screen Ltd and a pioneer in the use of smoke and fog in a security role. Currently chair of the BSIA Export Council and Vice Chair of the Security Equipment Manufacturer’s Section.


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