The global state of affairs is as uncertain as it has been in many years. It is a reminder that situations change and what we have come to expect is not guaranteed to be the future; and things can change quickly. The COVID-19 outbreak certainly showed us how supply chains are reliant on people, and in some cases people in faraway countries. Shortages of certain good were not even in our minds as a possibility prior to COVID-19.
The world of technology and computer processing has also been affected by COVID-19. China’s zero tolerance policy toward covid meant massive shutdowns of manufacturing plants in China and subsequently long delays in getting certain electronics. Couple that with an increased demand for electronics like web cameras and laptops which were crucial for work-from-home strategies, and backlogs reached months in duration at its peak. The current lockdown in Shanghai is causing disruptions today.
A pandemic is not the only global event that can affect your technology. Russia provides a significant portion of the world’s nickel, an element used in electronics from computers to phones. Prices have recently soared in light of the war in Ukraine. Will the sanctions affect the supply and availability of nickel?
Even more concerning is the lack of diversity in semiconductor manufacturing. The chart below shows the manufacturing and country of production for semiconductors:
As you can see a vast majority of semiconductors are manufactured in Taiwan and of the remaining amount, China claims a portion of that, and they are scaling up their resources quickly. Of the high-performing semiconductors, the disparity is even more alarming with 91% being produced in Taiwan according to the New York Times. China is also the leading supplier of lithium used in cell phone and laptop batteries. It is not hard to see how a China-Taiwan conflict could cripple the semiconductor industry and dramatically affect the availability of semiconductors and batteries.
On a macro level, the hope is that our elected leaders also see the writing on the wall and developing solutions to deal with the associated risk. Our reliance on foreign resources, particularly unfriendly ones, can translate to a significant problem for American business. Building up our capabilities to provide these vulnerable resources or at least ramp up sourcing them from more geo-politically friendly countries should be a priority. We have seen Intel purchase Israeli Tower Semiconductor for $5.4 billion as commitments to building out manufacturing in the US and Germany.
On a micro level, what should your business be doing to prepare? Mining your own nickel and building your own semiconductors are not a realistic solutions. Perhaps a place to start would be to examine your computer infrastructure and evaluate its readiness to deal with such a problem. If your business is reliant upon aging equipment that is ripe for an upgrade, perhaps investing in that before the next crises hits makes sense to do. Evaluate the importance of the equipment you have as each may have differing levels of importance to your business process. Those that are critical should be given higher attention than those electronics that are non-critical. Perhaps having extra stock on hand may make sense for critical equipment. Have a plan for such an event so that should it come to pass, you are not simply reacting to circumstances and instead are following the plan you have thoughtfully prepared.
Here at Colden Company, we have a diversified supply chain that allowed us to navigate the backlog in electronics due to COVID-19 better than most. We aren’t solely reliant on a single vendor for much of what we procure for our customers. Consequently, we were able to meet tight time frames for our customers even during the height of the pandemic delays. We purchased a quantity of web cams at the start of the pandemic and were able to supply them to our customers when places like Amazon and New Egg were sold out.
Perhaps cloud-migrations could be an effective strategy for your business as well. Services like Microsoft Windows 365, which is a cloud-based Windows PC, can be of value if equipment becomes more scarce or costly. Renting a virtual instance of a Windows PC instead of replacing the hardware may be a solution for some.
Would you like to discuss your company strategy with us to make sure your business is taking the right steps to prepare and mitigate risk? Contact us today at (888) 600-4560 or email us at info@coldencompany.com to speak with one of our experts.