The global COVID-19 pandemic created a perfect storm of supply issues in manufacturing along with an increased demand for IoT-enabled solutions to keep businesses running smoothly and safely. Whenever demand outpaces supply, conditions may be ripe for a shortage, which is exactly what is happening right now to the global supply of semiconductors — or chips — which are used to power computers, electronics, and IoT devices in our increasingly connected world.
Several circumstances have contributed to the increased demand and low supply that led to the global chip shortage. The Washington Post reports that the pandemic certainly played a big role, either shutting down or slowing manufacturing operations while remote workers and distance learners spent more money on home electronics such as TVs, computers, and video game systems. In turn, electronics companies purchased extra chips to keep up with demand, which led to a supply shortage for other industries, such as automobiles.
According to the Washington Post, the rise of 5G also played a role in causing the chip shortage. New 5G devices require more chips than previous generations of smartphones, and with roughly 25% of phones sold in 2020 being 5G-ready, chip fabrication was already struggling to keep up with demand. U.S. government trade policies and demand for cryptocurrency were also factors.
Every connected IoT device that makes use of a cellular connection — 4G, 5G, LTE-M, NB-IoT — uses a cellular IoT chipset. “The chipset can be embedded directly into the device’s printed circuit board or into an IoT module that is placed in the device,” according to a report from IoT Analytics. The chip shortage means that the demand for 20 million cellular IoT chipsets will not be met in 2021, also the report states that the industry is expected to see a growth of 9% year-over-year in 2021, lower than originally anticipated, while prices are expected to increase sharply.
According to technology writer Stacey Higginbotham, the shortage may usher in an era of hardware innovation for IoT and other industries that rely on semiconductors. She writes that engineers and designers who see shortages in certain parts may need to design them out of their products, either integrating more functions into a newer, specialty chip or possibly performing functions in software that used to rely on hardware.
At KORE, we understand the challenges of deploying, managing, and scaling IoT solutions. We support our customers with a full suite of IoT managed services that include hardware procurement, inventory management, forward and reverse logistics, as well as end-of-lifecycle device management. From solution design to ongoing operations, we help businesses simply IoT with seamless execution and a constant focus on maximising the return on IoT investments.
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