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Microchips, milk, and the Beatles

I am a huge fan of uncommonly used words that have specific meanings for unique situations. Some of my favorites are elysian, mellifluous, poltroon, and sequacious. Here’s another one that just might apply to what has transpired over the past two years – Inure.

Merriam-Webster defines inure (i-ˈnu̇r) as, “to accustom to accept something undesirable.” In other words, when we are inured to something we have gotten used to something unpleasant. After our collective experience over the past two years with the chip shortages, we might say we are inured to scarcity of many products.

But wait, did we get used to the challenging supply chain, or did the problem go away? I would argue the answer is a bit of both.

Early in the pandemic, I wrote a blog when the global chip shortage that was just getting started. Little did I know I would be writing about it again last May when chip shortages had reached their peak. Cars were shipping without electronic features, new products had chips scavenged for installation into other products, and construction on new chip fabrication plants was behind schedule.

Where are we now a year later? We are certainly in a better place but are not completely out of the woods as delays still exist in many products. Chip shortage-based scarcity is obvious to consumers when it comes to products like automobiles, home internet access points, and laptops. Car inventories are increasing and the demand for new PCs and laptops has ensured a healthy supply.

But what about the industrial products we don’t see?  Here’s an example:

I have a friend who owns a company that manufactures industrial-grade control panels used to manage and control processes in various operations. The panels could be controlling the paint line at an automotive plant, regulating the flow of a municipal water system, or even managing the production lines at a food manufacturer.

One of the most important components in each panel is the programmable logic controller (PLC). Acting as the brain of the panel, the PLC is a microprocessor-based controller containing programmable memory to store program instructions and execute various functions.

Even though COVID seems mostly behind us, the after-effects linger with the PLC supplies.  There are only four major manufacturers in the world that can produce industrial grade PLCs, and all have faced various challenges leading to months-long lead times for their products.

So, what does that mean to us? Plenty – and it hits us in the pocketbook.

One of my friend’s company’s largest customers is a regional dairy. The control panels that he provides control the flow of milk from delivery, through pasteurization, through packaging. Lack of ability to upgrade old lines or build new ones means a lower supply of consumer ready product. With less milk available to the consumer prices rise. Rising milk prices impact not just the milk itself, but any product containing it. Now you know at least one reason your cheese is costing more.

So, what can we expect in the future? I have reason for optimism and a bit of pessimism. Let’s deal with the pessimism first. I want to end on a high note.

While the Taiwan Semiconductor (TSMC) chip fabrication plant I mentioned in my May 2022 blog is complete, it will not begin churning out chips until next year. TSMC has announced plans to build more fabrication plants in the United States (US). That’s good. Here’s the challenging part – The company says chips built in the US will cost 20-30% more than those produced in Taiwan.

So, why the optimism? The challenges of the chip supply and uncertainty about political stability in the far east motivated a bipartisan group in Congress to pass the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act. President Biden signed the bill into law on August 9, 2022, and authorized by executive order the semiconductor funding.

CHIPS has already spurred investment in new or expanded American semiconductor manufacturing. And, while these investments are years away from paying off, I will choose to sing along with the Beatles – I've got to admit it's getting better, a little better all the time. It can't get no worse.

Want to share some of our optimism about the future? Contact us and find out how LRS IT Solutions professionals can help chart your course.  

Patrick Schmidt is a Technology Lifecycle Management Specialist with LRS IT Solutions. For more than 25 years, he has been helping customers get a firm grasp on their asset and contract management with a combination of comprehensive service level analysis and lifecycle management best practices.