Initially centered in the auto industry, the semiconductor shortage has now spread to a range of other consumer electronics, including computers, smartphones, tablets, headphones, and appliances. The latest news is that internet routers could become the next victim of chip shortages disrupting global supply chains and may pose a problem for households and businesses who need an internet connection to survive in today's digital economy.
Sources told Bloomberg that internet service providers report delays of up to one year for network routers due to chip shortages. This is doubled previous wait times, the source added.
In today's hybrid work environment, internet routers are among the most critical devices to keep businesses and employees connected. If a router shortage develops, it will prevent an internet service provider from adding new customers to its network. Nevertheless, existing customers wouldn't have their routers serviced upon malfunction or upgraded if they need more speed.
Karsten Gewecke, head of European regional business for Zyxel Communications Corp, a Taiwan-based router-producer, said remote work spurred by the virus pandemic led to a massive demand pull for home broadband equipment. The chip shortages couldn't have come at the worst time as more people work from home.
Zyxel recently urged customers to order routers well in advance because the lead time for semiconductor components from Broadcom has doubled since last year. Zyxel is a major supplier of routers across Europe.
Adtran, a U.S. network equipment maker, warned customers about upcoming supply chain risks and has more than double its inventory to avoid chip shortages.
Gewecke said no internet service provider had exhausted their inventory of routers, but supplies will be tight for the next six months. "We have been very close several times," he said. "It could still happen."
Susquehanna Financial Group shows lead times for chip orders has just surpassed the 2018 highs.
"It's a snowball effect that we're pushing in front of us, and the situation since then has just become worse and worse and worse," said Gewecke. "When I talk to some of the chipset vendors, some of them tell me that they have something like overbooking of 300% of their capacity."
It comes as no surprise that given the current shortage in semiconductors, chip prices are quickly rising in early 2021.
Earlier in the year, we noted that the chip situation had been turning dire and was now being referred to as the "most serious shortage in years". Qualcomm's CEO said last month that there were now shortages "across the board."
And it wasn't just Qualcomm or Samsung executives speaking out: industry sources said chip shortages are now beginning to hit Apple.
The potential shortage of network routers comes at the worst possible timing as the workforce's digitalization pushes millions of people into remote or hybrid work that means network routers, if it's at home or their employer, are more critical than ever.