The shortage of ICT products and spare parts in 2022

Rafael Perez Medina
March 23, 2023

By November 2022 we are still feeling the diminishing effects of a pandemic but many consequences are still very palpable in global, regional, and local economies. The ICT sector is still feeling and managing the by-product of these times. On the first order the disruption of the supply and manufacturing chain, on the second order a wave of canceled orders due to a lack of materials to produce parts and equipment has put stress on all players involved in the production, distribution, and sale of ICT equipment.

The factories of the components for the manufacture of ICT equipment are mainly located in Asia, specifically in China and Taiwan. The pandemic has resulted in temporary closures due to outbreaks, as well as a complete stop of segments of the production chain due to governmental prevention or prohibition. These cuts in OEM’s activity have led assembly plants to cancel certain orders to prioritize some products over others. In a landscape with reduced supply companies like Intel choose to meet the demand for their higher-end products, having a better return for them:

"Intel, for example, until it rolled out its new 10 nm system, prioritized server and high-end desktop processors over low-end processors with its 14 nm capability" (1).

And precisely this prioritization causes the supply of parts and equipment to be reduced to the products that have the highest economic value for OEMs. These supply chain and production problems are forecast to persist through 2023. Prices will rise and lead times will increase significantly:

"The company's Commodity IQ platform predicted that 85% of price dimensions will increase and 83% of lead times in delivery time will extend as this quarter progresses.

The same forecast extends into next year, as prices are likely to increase and more than 70% of lead times will increase through Q1 2023."(2)

But it's not all bad news. The reality is that foundries have made a gigantic effort to supply the demand during 2022: increasing their production capacity (reaching in some cases to have 100% of the productive capacity of the plants) and not hoarding components. Another reality is that countries have seen an opening in their distribution routes as a consequence of the relaxation of the sanitary measures seen in 2021, causing the demand for ICT products such as laptops, tablets, and mobile devices to decrease little by little while companies and workers normalize their activities. We will see what 2023 has in store for us, possibly a normalization of demand and a possibility to reach a balance in production.