Insight

Is the chip shortage actually very good for the channel?

One of the biggest challenges facing the IT industry right now is the ongoing chip shortage.

Previously vendors and analysts have predicted the situation might ease by the end of the year. Back in April, Cisco CEO Chuck Robbins estimated it would take six months “to get through the short term.”

That timeline appears to have been optimistic, according to a new report.

“The shortages are going to continue indefinitely,” Brandon Kulik, head of Deloitte’s semiconductor industry practice, told Ars Technica on Thursday. “Maybe that doesn’t mean 10 years, but certainly we’re not talking about quarters. We’re talking about years.”

The publication reported on how the “snarls in the semiconductor supply chain” are weighing on economic growth. Both GM and Ford said that missing chips led to slashed profits for the third quarter, and Apple is rumoured to be cutting this year’s production targets for its iPhone line-up.

So how on earth could the chip shortage for the channel? Well that’s the view of Canalys CEO Steve Brazier.

Speaking at the Canalys Channels Forums EMEA a couple of weeks ago, he described the problem as “the number one issue now in the world.”

Steve told partners: “It might mean you can’t invoice an order at the end of our month or a quarter and you miss your target. I guess that’s bad news.

“But it also means a whole lot of good news. Because with supply shortages, prices go up. With supply shortages, you change the conversation with your customer to not ‘which product is cheaper,’ but ‘which product can I deliver?’ And with supply shortages, you can also go to the customer and say, ‘well you may want to stick with buying that brand, but there might be a six month delay. Have you considered an alternative brand? And that choice brings margins.

“So there is no doubt that one of the reasons why the channel is doing very well right now, is shortages. And shortages will continue, we predict, at least for the next 12 months, and most likely well into 2023.

“The key shortages of semiconductors, will remain short. You simply cannot build new fabs quick enough to cope with the demand that’s being created by this overwhelming success of the technology industry, plus every other industry is becoming like the tech industry and needing more and more semiconductors.”

Steve maintains that the supply chain suddenly becomes a key differentiator – for everybody in the channel.

“For the channel partners, how to get to the customer? How can you meet your commitments you’ve made? For the vendors, have you procured enough components? How much inventory do you stock? Can you deliver that down the chain?”

Importantly, he says, it also makes the key value of tech distribution incredibly valuable. “Getting the precious stock you have to the right place, at the right time, as quickly as possible, and more importantly, making sure the communication flow is coming through so that everyone in the chain is well informed of what the situation is.”

What do you think? Do you think the channel can reap rewards from the current shortages? We’d love to know.

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