The global chip shortage has been going on for over two years now, and it’s still unclear exactly when chip production will return to normal levels. Despite hope that the issue would start to resolve itself last year, the IT industry is still experiencing hardware supply delays of up to 12 months. According to Forrester, this won’t change in the immediate future:
“Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023.”[1]
According to analysis from Goldman Sachs, the semiconductor shortage has impacted a staggering 169 different industries[2], with the most prominently documented impact being the automotive industry. AlixPartners found that automakers have experienced losses of up to $73 billion as a result of the supply chain disruptions.[3] Apple also reported losing $6 billion in sales due to the chip shortage in fiscal Q4 2021 alone.[4]
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The ripple effects of this crisis have been felt across the IT industry: Dell CFO Tom Sweet said his company has not been immune to the crisis, with the shift to remote work increasing demand for PCs.[5] Meanwhile, Intel has announced it is investing $20 billion into two new plants in Arizona to help counter the supply challenges; despite this, CEO Pat Gelsinger has publicly stated that he expects the shortage to continue into 2024, due primarily to a lack of chip manufacturing equipment.[6]
How can enterprises respond to semiconductor shortages?
Given the fact we’re expecting backlogs and delays to continue for at least the next 12 months, enterprises face some difficult decisions as they look to mitigate risk for the foreseeable future, accelerate their digital transformation, and stay ahead of the competition. Essentially, the choice is to pause and wait patiently for the shortage to go away in its own time, or be proactive by exploring alternative solutions. Many enterprises are turning to virtual infrastructure solutions to help keep their digital transformation initiatives moving in spite of supply chain challenges.
In a recent poll, we asked our enterprise customers how they were planning to address the global supply chain challenges that are impacting their IT and networking infrastructure plans in 2022. This is how they responded:
While 83% of the enterprises who responded are looking at virtual IT to help mitigate future risks driven by chip shortages, it’s perhaps even more relevant that 29% are exploring virtual solutions as a short-term fix. The value proposition behind this idea is simple: virtual IT solutions can be set up in a matter of minutes, with no need to wait months for hardware to become available, and no need to face the logistical challenges of shipping equipment during a global pandemic.
However, these businesses would do well to recognize that virtual IT solutions can continue to deliver benefits long after this temporary chip shortage clears up. These benefits include greater agility and cost-efficiency. If hardware shortages ever occur again in the future for any reason, enterprises will already have the built-in flexibility they need to ensure their business isn’t impacted.
Cloud services can help, but the right strategy is essential
One way that businesses have sought to cope with the chip shortage is by accelerating their public cloud adoption. However, public cloud may not be the cure for all the issues these businesses face. Relying exclusively on public cloud services is likely not the most cost-effective option, due to the hidden costs of cloud. In addition, storing data in the public cloud is typically a non-starter for businesses concerned with data privacy compliance.
In contrast, hybrid multicloud combined with software-defined networking solutions can provide the best of both worlds: all the agility and scalability benefits of the public cloud, with none of the cost-efficiency and security drawbacks. With the right hybrid multicloud architecture, customers are empowered to move quickly to keep up with technology trends. If their existing assets no longer meet their needs, there’s no need to worry about trying to modernize them. Instead, they can simply replace them by deploying the latest technology whenever and wherever they need it.
Pairing virtual solutions with a hybrid multicloud architecture can also help customers shift away from CAPEX spend, toward predictable OPEX-based costs. This is especially important at a time when interest rates are up, and excessive demand is driving inflation. Additionally, Equinix offers virtual solutions via an automated platform that can be switched on and off in minutes, not months. This helps ensure customers are paying only for the services they need.
Equinix enables virtual infrastructure on a global scale
Platform Equinix® is uniquely positioned to be the foundation that supports as-as-service virtual solutions. Equinix IBX® data centers are located in more than 65 metros worldwide, providing the physical infrastructure needed to offer on-demand, software-based services wherever our customers need them.
In recent years, Equinix has made significant capital investments to expand our data center footprint and improve our interconnection services. As a result, we can help our customers order compute, network and storage capacity in a virtual and elastic manner. Customers can add capacity with the press of a button, and turn it off once they no longer need it.
Equinix offers a number of products that support virtual edge compute and networking, including:
- Network Edge, which helps modernize networks in minutes via virtual network functions from top providers.
- Equinix Metal™, which helps scale up and scale down physical infrastructure as needed via interconnected, automated Bare Metal as a Service.
- Equinix Fabric™, which helps connect global digital infrastructure and services on demand via secure, software-defined interconnection.
These products, combined with our global data center footprint and digital ecosystem of top cloud and network service providers, help make Platform Equinix the ideal home for hybrid IT.
To learn more about how the Equinix approach to virtual infrastructure can help you navigate the ongoing chip shortage while keeping your digital transformation on track, read the white paper “Physical infrastructure at software speed.” This paper will guide you as you make a business case for an optimized hybrid infrastructure strategy, and then execute that strategy using virtual infrastructure solutions.
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View the Equinix Hot Takes video below for a closer look at the global chip shortage. In the video, I provide more detail on what’s causing the shortage, how it’s impacting businesses around the world, and what those businesses can do to address it.
[1] Forrester blog, “The Global Chip Shortage Won’t Ease Soon”. Glen O’Donnell, April 2021.
[2] Goldman Sachs, “The Global Chip Shortage: Impact, Outlook and Recovery”.
[3] “Shortages related to semiconductors to cost the auto industry $210 billion in revenues this year, says new AlixPartners forecast”.
[4] Business Insider, “Apple took a $6 billion hit from the chip crisis as it races to make iPhones ahead of the holiday season”. Huileng Tan, October 2021.
[5] Forbes, “Dell Technologies CFO Tom Sweet on The Chip Shortage, VMware Spin-Off And The Post-Pandemic IT Market”. Samantha Todd, August 2021.
[6] CNBC, “Intel CEO now expects chip shortage to last into 2024”. Kevin Stankiewicz, April 2022.
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