Internet service providers (ISPs) are seeing router order quotes extend to 60 weeks due to the global semiconductor shortage, reports Bloomberg.
Zyxel Communications Corp., a major networking device supplier, stated its bottleneck began after the coronavirus outbreak disrupted manufacturing in China.
The chip crisis initially affected the automotive sector but has expanded into other segments and has started to affect OEMs in many different fields.
Ongoing Router Supply Issues
Router manufacturers have recently informed their customers that their order wait times exceed 12 months. So far, ISPs such as Telenor SAS and Zen Internet have not run out of equipment, but the situation is precarious.
Networking gear vendors are dealing with delivery issues now because their products have become increasingly in demand. Consumers and businesses sought to acquire new networking hardware as part of the widespread remote work pivot. That development bolstered Zyxel’s bottom line as ISPs purchased its equipment to add new subscribers to their networks.
But, the company also burned through its part inventories and cannot quickly acquire new components, a problem that first arose last year.
The firm struggled to fill orders in 2020 because of month-long factory shutdowns in production hubs like China. It also encountered higher shipping costs and delivery delays as logistics providers prioritized medicine and PPE distribution.
This year, the networking gear segment has grappled with new complications caused by the global semiconductor shortage.
Zyxel learned some of its chipset suppliers had overbooked their capacity by as much as 300 percent. It learned that one of its crucial suppliers had sold through around 90 percent of its 2021 inventory before the first quarter ended. The company has also had a difficult time sourcing power management ICs and memory modules.
The company does not believe its supply chain issues will be resolved quickly, estimating its output will be constrained for the next six months.
Electronics OEMs Facing the Uphill Battle
Zyxel is not the only electronics OEM facing an uphill battle during the global chip crunch. Since the event began late last year, it has disrupted normal operations in several fields. However, the problem is exacerbated for smaller companies that do not make massive part orders.
One major cause of the semiconductor crisis is an imbalance between end-market demand and available production capacity.
Foundry service providers dedicated their manufacturing lines to fabricating personal electronics components in response to post-pandemic market trends. Those firms benefited from serving OEMs that needed millions of cutting-edge and, therefore, expensive parts to facilitate their product launches.
For instance, Counterpoint Research estimated Apple shipped in 81.9 million iPhones during the fourth quarter of 2020.
Consequently, foundries have less incentive to prioritize orders from companies like Zyxel that utilize fewer and less advanced parts. The industry-wide shift left automakers without enough electronic parts to keep their assembly centers running normally. It similarly affected home solar power system and cryptocurrency mining equipment manufacturers.
Unfortunately, the most effective solutions to resolving the chip shortage – namely expanding foundry production capacity – cannot be implemented quickly. That means the current semiconductor bottleneck will continue for the foreseeable future. And OEMs with comparatively small ordering component volumes are going to be stuck waiting in line.