The device manufacturing industry experienced a shortage of chips last year when the COVID-19 pandemic struck that disrupted nearly all types of operations. Gartner’s, a research and consulting firm, sees this shortage to be prolonged and that the recovery will begin in the second quarter of 2022.

“The semiconductor shortage will severely disrupt the supply chain and limit production of many types of electronic equipment in 2021,” said Kanishka Chauhan, senior research analyst at Gartner. “Foundries raise the prices of wafers and, in turn, chipmakers raise the prices of devices.”

According to Gartner, the chip shortage started primarily with devices, such as power management, display devices, and microcontrollers, made on legacy nodes in 8-inch foundry factories, whose supply is limited. The shortage has now spread to other devices, and there are capacity constraints and shortages for substrates, wire bonding, liabilities, materials, and testing, all of which are part of the chain. supply beyond chip factories.

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“These are highly commoditized industries with minimal flexibility or the ability to invest aggressively on short notice,” Gartner said.

Key actions

Gartner has developed four key steps original equipment manufacturers (OEMs) can take to mitigate lost revenue and mitigate the risk of a global chip shortage.

Increase supply chain visibility. The chip shortage is forcing supply chain managers to extend supply chain visibility beyond the supplier down to the silicon level, which will be critical in projecting supply constraints and bottlenecks. ‘strangulation and, possibly, predict when the crisis situation will improve.

Supply guarantee with companion model and / or pre-investments. OEMs with smaller, critical component needs should look to partner with similar entities and approach chip foundries and / or OSAT players as a combined entity to achieve some leverage. If scale allows, pre-investment in an unmarked part of the chip supply chain and / or foundries could secure the company a long-term supply.

Follow leading indicators. While no single relevant metric can project how the scarcity situation will evolve, a combination of relevant metrics can help guide organizations in the right direction.

“Since the current chip shortage is a dynamic situation, it is essential to understand how it is constantly changing,” said Gaurav Gupta, vice president of research at Gartner. “Tracking key indicators, such as capital investment, inventory index, and semiconductor industry revenue growth projections, as an early indicator of inventory status, can help organizations to stay up to date on the issue and see how the industry as a whole is developing.

Diversify the supplier base. Qualifying another chip source and / or an OSAT partner will require additional work and investment, but it would go a long way in reducing the risks. Building strategic and close relationships with distributors, resellers and traders can help find the small volume of urgent components.