Inside view: why are technology lead times so long?

Inside view: why are tech lead times so long?

If you’ve heard of delays in the supply of technology, you may have assumed this is a glitch that will soon sort itself out. Unfortunately, we’re in the midst of a worldwide semiconductor shortage and it looks like it’ll be with us for some time. I’m going to explain what’s going on and why, and what you can do about it.

We live in a world of lean manufacturing, with just in time (JIT), make to stock (MTS), and build to order production. These efficiencies help keep costs down and enable quick transitions to improved components and models, but they don’t allow much wiggle room.

Ordinarily, we’d expect to see typical lead times of two or three weeks on laptop and desktop PCs, but we’re currently seeing anything between 12 and 20 weeks – and these lead times seem to be going up rather than down.

These problems aren’t confined to PCs either. The impact has been wide-ranging: car manufacturers have had to temporarily shut their factories, games consoles have been out of stock, and even Apple was forced to delay its iPhone 12 launch by two months.

All of these issues reflect a fundamental imbalance in semiconductor supply and demand – and its more than just the knock-on effect of COVID closures.

Supply chain molehills making mountains
Effectively, it’s a perfect storm: multiple supply chain issues are hitting simultaneously, while demand is spiking, and their combined impact is unprecedented.

COVID has caused factory shutdowns, as well as delays due to staff shortages throughout the supply chain. Also, a lot of semiconductor production is concentrated in a relatively small area of Asia, leaving it vulnerable to natural disasters or extreme weather. Even Texas had enough snow earlier this year to shut down production for a time. Add to that, a recent fire at a major Japanese factory that will affect its production for months to come.

We've seen unprecedented demand for end user kit, such as laptops, as companies equip their staff to work from home. Gartner reports that the PC market is seeing its fastest growth in two decades, and that’s continued into 2021. And while we’re through the short-term peak of last year, brought about by lockdowns and home-working, the overall demand hasn’t really slackened.

Now, there are new issues driving purchases, such as organisations needing to buy laptops to replace short-term rentals, and to equip their people for long-term remote working. In some cases the move to hybrid, home and office, working will mean businesses providing equipment for an employee, at the workplace and in their home.

Of course it’s not just PCs that use semiconductors: monitors, wireless keyboards and headsets, networking, games consoles, TVs – both seeing lockdown sales booms – smartphones, all sorts of white goods, cars (also now seeing strong consumer demand)… they’re used in almost everything.

I mentioned earlier that typical lead times have ballooned to 12 to 20 weeks. For a few components, such as some AMD chips, lead times are reaching 30 weeks. We’re also seeing long delays on screens, as demand has increased for laptops, tablets, and TVs.

Finally, where demand exceeds supply, it’s almost inevitable that prices will increase. Manufacturers are already feeling the effect of more costly components, and I’m reliably informed that this will soon translate into higher device prices. 

What to do
In the medium to long term, I expect market forces to prevail and the supply of semiconductors will increase. But this isn’t a quick fix, with it taking up to two years to get new factories up and running.

We believe shortages will be around until perhaps the end of 2022, so you can’t just wait it out. Home, or hybrid, working will become the norm for many, and adding production capacity is slow.

This is a worldwide problem, so be wary of anyone promising you near normal lead times – their claims are likely to come with a sting in the tail.  

Basically, the best solution is simply to plan further ahead than you’d normally need to. If you’re refreshing laptops in August, you might want to order them now – which is exactly what we’re doing at Total.

At Total, we’re working closely with our partners to help customers, particularly those with urgent problems. We can advise our customers on what the best equipment to buy is for their needs, the best route to be able to secure it, and on achievable timescales.

While this is a serious situation, which is affecting all IT providers, it is manageable. With careful planning, open and honest communication, and teamwork in the supply chain, we can help you get the equipment they need.

Talk to your account manager to find out more about how Total can help you plan your procurement.