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How Does the Semiconductor Chip Shortage Affect the Telecom Industry?



The shortage of semiconductor chips has an impact on many industries, do you know what impact this crisis has had on the telecommunications industry and the photonics industry, how should we face it, when will this all end?

The new round of COVID-19 Omicron epidemic has had a big impact on the production of all walks of life and also caused a serious shortage in the semiconductor chip industry. As an industry closely combined with chips, what impact does the semiconductor chip shortage have on the telecom and optical industry? How should the photonics and telecommunications industry deal with this global chip shortage? This article will show you a new perspective with details.


What is the Semiconductor Chip?


A semiconductor chip, commonly known as a computer chip or integrated circuit, is an integrated circuit printed on conductive material (silicon is widely used at present). It is the heart of the computer, and the operating software is based on this physical building component to play an effective role. For a long time, chip manufacturers have designed more and more complex circuits into smaller and smaller spaces. The semiconductor chip industry has greatly improved the speed and cost of computers. However, the crystallization of modern technology also leads to the scarcity of semiconductor chips due to their high-tech properties.


The BBC has reported that silicon, as the core material of the semiconductor business, has a market value of US $500 billion, providing power for various technology industries with a global value of more than US $3 trillion. At present, the raw materials of the semiconductor industry are mainly produced in Japan and Mexico. The main production area is Taiwan, China, and the United States also produces a small amount of production.


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Impact of Global Semiconductor Shortage


In our daily life, semiconductor chips play an essential role all the time, solving jobs that require computing or processing information. Due to the COVID-19 epidemic, many products that need semiconductor chips in various industries are in short supply. The shortages, such as mobile phones, computers, and even Teslas, are caused by the scarcity of the output of chips and the shortage of global shipping capacity has led to a shortage of raw materials, and the supply of chips cannot meet consumer demand. These factors have caused a global shortage of chips.


Throughout the entire semiconductor industry, the United States has maintained the world's leading position in this industry, but most of the revenue comes from semiconductor R&D and sales, earning 45% to 50% of the entire industry. The chip manufacturing industry is mainly in Asia. Taiwan accounts for 83% of the world's processor chip production, and South Korea accounts for 70% of the global memory chip production. With the development of their technology, their leading position will further expand. Taiwan currently dominates the chip foundry industry, with The Taiwan Semiconductor Manufacturing Co. earning 54% of total global chip foundry revenue in 2020.


In the photonics and telecommunications industry, the semiconductor chip shortage has also caused serious problems, and many network equipment manufacturers have been affected, including procurement delays, project delays, and chip shortages have different degrees of severity due to different regions and companies.


How Did the Global Chip Shortage Happen?


The key reason for the shortage of chips is the COVID-19 epidemic, which has caused almost all the impact. Previously, due to the virus epidemic, many cities were forced to lock down, which also increased people's demand for home offices, and the sales of computers increased by 11% year on year. The demand for semiconductor chips is increasing, but factories have been unable to produce fully because of the epidemic. Until now, the output of many factories has not been raised to the level before the epidemic.


People who work from home will use various routers and high-speed Internet, and consume bandwidth through Zoom, FaceTime, and some streaming entertainment applications, which will increase demand, lead to insufficient supply, and finally lead to less and less chip inventory.


More importantly, chip production generally needs to be scheduled in advance, and the sudden outbreak, coupled with manufacturers' inability to return to pre-pandemic manufacturing plans to meet the needs of all industries, makes the semiconductor chip shortage worse.


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How to Face the Global Chip Shortage?


The global chip shortage has caused an essential impact on the photonics and telecommunications industries. How should these companies solve these problems? QSFPTEK offers you the following suggestions. Through these suggestions, you can reduce some of the impacts and bring some advance preparation to the company's operations.


Planned in Advance and Forecasting


The main way for the company of the photonics and telecommunications industry to mitigate the impact of the chip shortage is to prepare in advance. Although we still don't know how to solve the chip shortage crisis in the future, considering the development of the company, once you find that the products you plan for in the future are available, you need to order them immediately. Otherwise, when the company encounters production difficulties, you will face compromise or delay production, which should be learned to adapt for some enterprises that are accustomed to “just-in-time” technology purchases.


Put Some Delays in the Plan


Due to capacity reasons, many manufacturers may need to plan for delays in advance even if you place an order now, determine the timetable in advance with the supplier, communicate the possible situation to your customers in advance, and at the same time, actively contact the supplier to ensure Keep up to date with the latest news, at this step you need to improve your patience.


Be Flexible


When your order cannot be fulfilled in time, I suggest you have a backup plan. Although we don't know when and where the problem will occur, we can make it clear that when there is a problem, an emergency filing can help you in time to address emergencies, therefore, suppliers and procurement in the photonics and telecommunications industries need to be flexible enough in advance to respond to various issues that may arise.


Supplier Diversification


When purchasing materials, there should be multiple sources of procurement. Although this requires a lot of effort and time, it can greatly reduce the risk of our plan. Meanwhile, when we have established a strategic and close relationship with distributors and traders, we can help us solve many difficult orders to obtain some critical components that are difficult to obtain.


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At present, as the Omikron epidemic is still raging in various countries, we still do not know when COVID-19 will end, so it is difficult for us to know when the semiconductor chip shortage will end. Therefore, we need to prepare our production and construction plans in advance. The long-term coexistence with the virus may be new normal in the future.


QSFPTEK has always been committed to helping customers solve problems. When we communicate with customers, we always help our customers plan in advance and solve the impact of global semiconductor chip shortages and we are also reducing our delivery time to meet customers' needs. QSFPTEK can overcome the shortage of chips and stably provide optical modules and other devices for the communication industry.





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