When the COVID-19 pandemic hit, many manufacturers planned for a downturn and reduced demand, with semiconductor factories scaling down in anticipation of a larger-than-realized recession. Earlier this year, there were some signs that the shortage would begin to subside this year, but the ongoing crisis between Russia and Ukraine threatens to exacerbate the issue, according to Gartner.
In 2020, the economy recovered more quickly than anyone anticipated, with workers and consumers continuing to purchase tech to help them work remotely and entertain themselves while at home. Coupled with a faster recovery in the automotive sector where chips are critical, semiconductors for electronics became hard to find. This shortage is impacting a wide range of products, including automotive, computers, displays, smartphones, gaming consoles and many other electronics.
The shortage is ongoing despite planned capacity improvements and new factories, but Russia’s invasion of Ukraine may wreak further havoc on the semiconductor market, the research firm says in a new report.
According to Gartner, both Russia and Ukraine countries are major producers of material needed to make semiconductors. Ukraine is a large source of inert gasses such as neon which is required for the semiconductor lithography process. Meanwhile, Russia is a large producer of metals, including aluminum, nickel and copper, which are commonly used in all types of electronic equipment.
As countries throw trade sanctions and prohibit trade between certain entities, the result could mean an even larger shortage of raw materials, panic buying or depletion of inventories, and more sanctions or disrupted demand that result in imbalances to supply chains that spill over into planning and capacity management, according to Gartner.
The biggest risk is whether a new wave of panic buying of semiconductors and other technology sets in due to the conflict between Russia and Ukraine, according to Gartner.
“It was one of the major reasons for the onset of the ongoing semiconductor shortage, as it overstretched and deteriorated the supply chain further, without bringing any advantages to buyers,” writes Gaurav Gupta, vice president analyst at Gartner.
Devices already in short supply — power management integrated circuits, enterprise-based networking chips, field-programmable gate arrays — would primarily cause business disruptions to the automotive and communication industries, Gupta writes.
Gartner gives organizations three pieces of advice:
- Assess direct inventory levels of impacted materials and diversify supply chain sources outside of the region of conflict. Seek out alternative materials.
- Enhance the visibility of the supply chain, focusing first on teir-1 suppliers. Include distributors, manufacturers and lower tiers, such as wafer supplies.
- Continue to track and comply with sanctions imposed on Russia and allies.
For integrators, this means that certain devices may continue to be in short supply, so communicate early and often with suppliers when you need new technologies.
If you enjoyed this article and want to receive more valuable industry content like this, click here to sign up for our digital newsletters!