The semiconductor shortage isn’t going to end soon, says Forrester research director

Surging demand, international tensions and the complicated process of building new chip factories are some of the reasons tech buyers should plan to change tack for the near future.

The well-documented semiconductor chip shortage that drained global supply in 2020 isn’t likely to abate anytime soon, Forrester vice president and research director Glenn O’Donnell predicted in a new blog post. The once-boring semiconductor industry, O’Donnell said, is now the center of attention in the tech world and beyond as the world comes to the realization that practically every product we use contains a semiconductor of some kind and there’s nowhere enough manufacturing capacity to produce them all.

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It was just recently, O’Donnell notes, that “people learned that GPUs were useful for processing AI workloads…mobile phones became much more powerful, catapulting the ARM architecture from a quaint toy to become a real threat, [and] the Internet of Things became a reality, fueled by a rapid improvement in price-performance ratios on the chips.”

If that explanation doesn’t satisfactorily answer the question of why there’s a chip shortage, O’Donnell has further explanations: Cloud computing continues to grow, mobile phones sales are constant and cryptocurrency miners have been buying up the most powerful GPUs on the market.

To make matters worse, tensions between the U.S. and China leading to sanctions have caused Chinese companies to stockpile chips and manufacturing equipment, further draining global supplies.

Factor in the pandemic and its related boom in PC sales plus the increase in computing needs for remote collaboration software, and you have even more hands reaching into the global semiconductor pot.

“If it has a plug or a battery, it is probably full of chips,” O’Donnell said, adding that when the chip supply tightens, the entire modern economy feels the effects.

Don’t expect the problem to abate soon

“Technical advances just don’t go backwards. While the human race will need more chips, the manufacturing capacity cannot respond to keep up,” O’Donnell said, but he notes that there’s a problem: Increasing the supply isn’t simple.

Chip manufacturing facilities, like those currently being planned by Intel, TSMC and other companies require billions in investment and take at least two years to construct, O’Donnell said.

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All in all, O’Donnell said, demand will remain high and supply will remain low, which means Forrester’s take on the entire situation is a shortage lasting through 2022 and into 2023. “Data-center spending will resume after a dismal 2020, and edge computing will be the new “gold rush” in technology. Couple that with the unstoppable desire to instrument everything, along with continued growth in cloud computing and cryptocurrency mining, and we see nothing but boom times ahead for chip demand,” O’Donnell said.

How businesses and consumers will need to adjust

Availability problems and price increases leave tech buyers with several options, O’Donnell said. Not all are ideal, but until the chip manufacturing industry jumps this hurdle, one or more of these strategies may be necessary:

Wait, but know that the wait could be weeks or even months longer than expected,
Cancel orders and work with what you have,
Accept the fact that you’ll have to pay more,
Choose a different configuration or a different vendor,
Buy used,
Migrate to the cloud,
Make use of data center servers, which O’Donnell said often sit at around 20-30% utilization.

Pooling resources and automating infrastructure can be complicated, but worth it if the shortage continues.