The infamous chip shortage

Every year at HITEC there’s a new buzzword – remember the days of ‘big data’, ‘PCI’ and ‘blockchain’? If people weren’t talking about them, then they weren’t hanging out with the cool kids. This year’s buzzword didn’t have people running to the shop to buy jars of salsa, however, but instead feverishly placing electronics orders.

The ‘chip shortage’ was definitely topic of a lot of conversations this year at HITEC, 2021. When Covid-19 hit, a lot of semiconductors or ‘chips’ were diverted to fill the overwhelming need for electronics for those stuck at home. However, other factors were involved that supplemented the shortage beyond the supply chain issues.

Factories didn’t have enough people to work to manufacture chips, due to the pandemic. Other natural disasters in high-yielding, chip-producing countries also contributed to the problem.

Shortages ahead

The first sign that alerted the public of this issue was most likely from the automotive industry. Vehicles require anything from several hundred chips to more than a thousand. These chips control everyday functionality in cars, such as the ignition and braking systems, and basically tell the hardware what to do electronically. Car manufacturers assumed vehicle sales would slow due to people losing jobs and wanting to save money, but the opposite happened. Consumers wanted to get out and travel outside within their own means, and the automotive industry couldn’t pivot quick enough to restart factories and build more cars.

The automotive industry has tried to persevere during this shortage in several different ways. Some companies are forging relationships directly with semiconductor chip companies. Some car brands are dropping features that require chips, like blind-spot detection and software for fuel-management. Tesla even removed their lumbar support. Some companies are still continuing to build vehicles and set them aside in parking lots, waiting for chips to arrive. Either way, factories continue to idle and cut production in Asia, Europe and the US, causing low inventory levels and driving up costs for consumers. Most anticipate that there won’t be any relief until Q3 of 2022.

Several hardware vendors in the hospitality industry have had to raise prices, figure out creative ways to work with distributors, and prioritise orders fairly with tactics such as new construction projects trumping renovations in determining who gets what. Some have alluded to the new normal by only offering Wi-Fi in the lobby and not in the guestrooms due to the limited number of access points available. Is that preferrable over shutting a whole floor of guestrooms down? Probably. But guest impacts will be severe either way.

The key to survival

How have some industry vendors continued to operate successfully? Salto, a provider of smart access control solutions in the hospitality industry, anticipated the shortage in such a way as to secure an additional provider. Their new XS4 Original+ lockset carries the new provider chipset (along with the latest technology) and thus allowed them to allocate more of the existing chips to other products, resulting in shorter delivery times for all products.

A popular VAR in the television display space mentioned that they have been successful with the shortage issues by setting proper expectations with their clients from the very beginning. They are proactive by calling properties to recommend that they order and hold a decent amount of attic stock while inventory levels were still decent. They worked with management companies and general managers across their customer set, and provided a template that they could use to send out to properties to take orders efficiently and get attic stock. Hotels were also advised to reach out to sister properties to help each other out. Once the ability to order attic stock was diminished, due to dried up inventory levels, the vendor pivoted to offer different products that weren’t as popular yet had shorter lead times for delivery. This sometimes included an increase in price, but most hoteliers understood and accepted the higher costs as a consequence of the current worldwide issue.

In the end, constant communication is key to surviving the chip set shortage. Daily updates with manufacturers, as well as suppliers receiving real-time updates on what is in stock, are necessary. While this may triple the work and time involved, it’s mandatory to keep healthy relationships with customers. Another piece of advice to help circumvent the shortage issues would be to expedite any current network projects by focusing on the planning and design phase, so that hotels can formulate an accurate bill of materials. This will allow them to place an order with confidence so they can be delivered within expected time frames once they are ready for installation. They can then begin the next project while inventories are being replenished. As the old saying goes, ‘a watched pot never boils’, so diverting attention to something more exciting may help – like a big plate of nachos.