{"id":23787,"date":"2021-12-28T20:26:03","date_gmt":"2021-12-28T20:26:03","guid":{"rendered":"https:\/\/serverlift.com\/?p=23787"},"modified":"2025-05-02T16:41:14","modified_gmt":"2025-05-02T16:41:14","slug":"reasons-for-the-chip-shortage-and-the-effects-on-data-center-switching","status":"publish","type":"post","link":"https:\/\/serverlift.com\/ar\/blog\/reasons-for-the-chip-shortage-and-the-effects-on-data-center-switching\/","title":{"rendered":"Reasons for the Chip Shortage and the Effects on Data Center Switching"},"content":{"rendered":"

\"comicWhen your job and your company\u2019s success rely on the availability of high-quality data center equipment chips, it\u2019s understandable to feel nervous about the microchip shortage that is currently affecting the world. As with most major industry upheavals, the best way to adapt and stay flexible is to thoroughly understand the situation and make adjustments accordingly.\u00a0<\/span><\/p>\n

The following is a detailed breakdown of the causes behind the supply disruptions and how data centers will likely be affected.\u00a0<\/span><\/p>\n

Supply can\u2019t keep up with demand for a number of reasons.<\/span><\/h2>\n

While there are several factors in play, a distinct set of issues is dramatically impacting microchip availability.\u00a0<\/span><\/p>\n

Demand is higher than ever.<\/span><\/h3>\n

There is a sort of paradox happening these days. One might expect a return to basics during a global pandemic and a severe chip shortage and supply chain disruption, but instead it seems to have swung the opposite direction. If you were to look at the orders placed for electronic goods, you would never know there was a global chip shortage going on.\u00a0<\/span><\/p>\n

Sales are extremely robust. Orders for cell phones, tablets, and other personal electronic devices have not slowed down despite the lack of availability. At the same time, the development of more smart car systems and increasingly powerful crypto mining systems and personal computers means there is an even greater demand for microchips than before. Even things like home appliances and electric toothbrushes need microchips to function.\u00a0<\/span><\/p>\n

Because of the COVID-19 pandemic, the world has shifted toward a greater reliance on electronics even more rapidly than would have been predicted in a very short period of time. Adhering to social distancing and work-from-home requirements means taking plenty of Zoom and Skype calls. It also involves setting up a home office network with printers, webcams, laptops, and similar items that all communicate with one another. There has also been an uptick in the number of smart home devices joining IoT networks, probably because people were staying inside and making upgrades to their home appliances.\u00a0<\/span><\/p>\n

Even more than personal electronics, enterprise orders are pouring in as well. The growth of IoT and edge computing means that everyday businesses are setting up dozens or even hundreds of new devices per year. Large corporations are rapidly expanding their own IoT networks and edge computing capabilities.\u00a0<\/span><\/p>\n

Innovations in technology are as much responsible for this expansion as the pandemic. But regardless of the reason, businesses need a steady supply of microchips.\u00a0<\/span><\/p>\n

What most consumers aren\u2019t aware of is that all of these devices and services require data centers to support them. Many don\u2019t think about data centers or even realize that the industry exists. In data centers, microchips are used in almost every piece of equipment\u2014servers, routers, switches, and even the server-handling devices that are necessary for data center maintenance and upgrades\u2014to keep each service running smoothly. If any one of those pillars of support fails, the whole thing could crumble.\u00a0<\/span><\/p>\n

Demand is <\/span>so <\/span><\/i>high that microchip suppliers would be feeling the squeeze even under normal circumstances. Everyone from your toddler to your grandmother wants the latest phone or tablet, and there is already a backlog of orders for electronic products that is stressing the system. Even if all of the supply chain issues were to clear up overnight, it would still take months to clear the backlog and get pending orders into the hands of customers.\u00a0<\/span><\/p>\n

However, the fact that these are not normal circumstances is only compounding an already tricky supply issue.\u00a0<\/span><\/p>\n

Supply chain complications from COVID-19\u00a0<\/span><\/h3>\n

\"deliveryWhen COVID restrictions were imposed around the world in early 2020, the supply chain felt an immediate impact. Maritime traffic didn\u2019t stop and that created a logjam at ports around the world. The fear of COVID infection meant shipping crews were not allowed to come ashore and their containers could not be unloaded. As containers sat waiting to be unloaded, more container ships came behind them.<\/span><\/p>\n

This created a situation where the ports were blocked from receiving <\/span>\u0648<\/span><\/i> shipping goods and materials. That scenario has been duplicated around the world but continued to persist in the two ports in Los Angeles, California where the vast majority of international freight in the United States is received.<\/span><\/p>\n

Even where and when COVID restrictions were eased, the problem perpetuated inland. Trucking companies have experienced a shortage of drivers who could transport goods and materials around the country. This has been especially prevalent in the one area where more truckers, not less, were needed the most\u2014California, home to the bottle necked ports mentioned earlier.\u00a0 California law AB5 (which took effect January 2020) which classified many drivers as independent contractors and required the companies hiring them to pay them certain minimum wages and benefits otherwise reserved for full time employees.\u00a0 Instead of \u201chiring\u201d these drivers as employees with benefits, many trucking lines simply reduced routes, thereby restricting freight supply and driving up prices.\u00a0 Some economists have attributed the truck driver shortage more broadly across the United States to the Great Resignation sweeping through the American workforce. As workers were idled, they had a chance to reevaluate their lives and many decided to change careers.<\/span><\/p>\n

Geopolitical factors<\/span><\/h3>\n

The technology trade war between the United States and China has played a large part in the chip shortage as well.\u00a0<\/span><\/p>\n

In response to the geopolitical situation, Chinese companies such as ZTE and Huawei have spent at least the past year building a stockpile of chips in anticipation of more sanctions from the United States. That strategy further stressed the already overwhelmed supply chain that had been struggling as a result of the pandemic and other factors.\u00a0<\/span><\/p>\n

Taiwan\u2019s microchip mega-corporation, TSMC, is currently the largest chip manufacturer in the world. Their chips go into automobiles and many other devices around the globe. TSMC does plan to spend $28 billion in pursuit of expanding their chip manufacturing capabilities, but even so, materials shortages and tensions with China complicate matters.\u00a0<\/span><\/p>\n

How is the great chip shortage of 2021 affecting data centers in the United States?<\/span><\/h2>\n

Data center switching will probably be an area that suffers the most in the coming months. Many data centers have already been struggling to find switches, and others are just now entering the arena to compete with other data centers for the same limited stock.\u00a0<\/span><\/p>\n

Without switches, servers can\u2019t communicate with one another on the network, rendering the entire setup nearly useless. It is crucial for data centers to keep switches functional and up-to-date to keep their businesses running smoothly.\u00a0<\/span><\/p>\n

As any data center operator knows, the repercussions will affect far more than one or two isolated businesses. Data centers frequently serve multinational corporations that operate around the world. Major services such as video calling and banking could face disruptions or outright failure without the data center switches, routers, and servers that support them.\u00a0<\/span><\/p>\n

Perhaps that\u2019s why data center research has shown that enterprises have dramatically increased orders and pre-orders because of the news surrounding the semiconductor shortage and other supply issues.\u00a0<\/span><\/p>\n

In March of 2021, Broadcom announced that 90 percent of its chip production for the year had already been ordered or pre-ordered. No one wants to miss out because they weren\u2019t quick enough to place an order, so some companies have even begun stockpiling equipment in case of worse disruptions in the future.\u00a0<\/span><\/p>\n

Businesses around the world are heeding the writing on the wall and trying to shore up their defenses in preparation for microchip supply to dry up even further. As a result, the global demand for data center switches has skyrocketed while the available supply has dwindled proportionally.<\/span><\/p>\n

Although switch sales in 2021 were mostly fulfilled (even if wait times were long), experts warn that the huge increase in orders have only exacerbated the shortage. In turn, the actions of all of these businesses this year could have dramatic effects on the supply available next year and perhaps the years after.<\/span><\/p>\n

All of this translates into increased hardware prices. Inflation has compounded the already troublesome lack of supply. Together, these factors have caused price hikes, and that trend will likely continue.\u00a0\u00a0<\/span><\/p>\n

Companies can also expect longer wait times with fewer options to choose from. For some data centers, this could mean choosing a different device than you normally would. For others it may mean placing large clients on hold until the new equipment arrives.\u00a0<\/span><\/p>\n

Unfortunately, that\u2019s a wait that could take many months. Even priority customers such as major cloud service providers are subject to the supply chain. It\u2019s not a matter of calling in favors or utilizing connections. Products aren\u2019t on shelves, and that\u2019s not a problem that can be solved easily.<\/span><\/p>\n

While you may have thought pre-pandemic wait times of one to two months was bad enough, the average wait time is now in the<\/span> two- to four-month range<\/span><\/a> and climbing. And that\u2019s if you manage to find and order the equipment you need. Sooner rather than later (some experts predict worsening conditions before the second half of 2022) you may be facing conditions where certain products are simply not available anymore.<\/span><\/p>\n

Many major technology companies have already implemented price increases, and data centers as a whole could follow suit. Increasing prices may not be enough to offset the damage entirely, but it could help data centers limp along until the situation improves.\u00a0<\/span><\/p>\n

When should the chip shortage be over?<\/span><\/h2>\n

\"peopleYou are not likely to see a major improvement anytime soon. Chip manufacturers, including Intel, have <\/span>plans to develop factories<\/span><\/a> within U.S. borders and other friendly territories, but those factories require at least a couple of years for construction and then some matter of months before they can operate at optimum capacity.\u00a0<\/span><\/p>\n

Some industry news outlets predict that the situation will ease somewhat within the next couple of years, even as early as the second quarter of 2022. Others expect the squeeze to last at least until 2023 before manufacturing can accelerate enough to fill backlog orders, meet existing demands, and prepare for future demand.<\/span><\/p>\n

In the meantime, there is a delicate balance that must be struck between acquiring the necessary components that keep your business running smoothly and the outright hoarding of materials \u201cjust in case,\u201d which only makes the problem worse.\u00a0<\/span><\/p>\n

One silver lining could appear before too long, however. When times get tough, innovation provides the unexpected breakthroughs that often revolutionize entire industries. Keep your eyes open for new and promising developments in chip manufacturing, repurposing, and data center operations that could help ease the strain and even open new doors no one realized were there.\u00a0<\/span><\/p>","protected":false},"excerpt":{"rendered":"

When your job and your company\u2019s success rely on the availability of high-quality data center equipment chips, it\u2019s understandable to feel nervous about the microchip shortage that is currently affecting the world. As with most major industry upheavals, the best way to adapt and stay flexible is to thoroughly understand the situation and make adjustments […]<\/p>\n","protected":false},"author":34,"featured_media":23788,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[78],"tags":[403,406,409,408,402,20,407,405,404],"class_list":["post-23787","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-chip-shortage","tag-chip-shortage-2021","tag-data-center-chips","tag-data-center-research","tag-data-center-switching","tag-data-center-trends","tag-global-chip-shortage","tag-microchip-shortage","tag-semiconductor-shortage"],"yoast_head":"\nThe Chip Shortage and Data Center Switching | ServerLIFT\u00ae<\/title>\n<meta name=\"description\" content=\"The global shortage of microchips will likely claim data center switches as its next victim. 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