How IT Decision Makers Can Navigate the Global Chip Shortage

How IT Decision Makers Can Navigate the Global Chip Shortage

  • May 23, 2022

As the global chip shortage continues, here are our tips for protecting your network – and your business’ bottom line.

Has your business been impacted by supply chain shortages? You’re not alone. From retail stores left with empty shelves to years-long delays in building constructions, the disruptions have been felt by every sector globally. And one of the most sought-after (and scarce) items in this shortage has been semiconductor (electronic) chips.

With many network setups still reliant on traditional hardware, the pinch caused by the global chip shortage has extended to enterprise networking, with companies unable to provision infrastructure to keep up with their growth, or unable to upgrade and add features to improve their network security and performance.

Thankfully, your enterprise network doesn’t have to be at the mercy of these shortages. Here’s a breakdown of the situation – and what you can do to protect your network now and into the future.

When will the chip shortage end?

The COVID-19 pandemic did more than devastate our health in 2020. It also led to semiconductor factory closures and order disruptions, meaning that sourcing silicon wafers and other materials became almost impossible. The result was a chip shortage immediately felt by industries around the world.

To exacerbate the situation, the height of this chip shortage was accompanied by a boom in demand for electronics and infrastructure. This demand increase sent a huge ripple up the supply chain, resulting in massive delays which continue today (despite most factories now operating at full capacity). For example, automakers, which enhance new vehicles with the latest computer devices, slashed orders in early 2020, but demand came back sooner and with more urgency than they expected .

As another example, the rise in remote employees in medical billing, banking, and other computer-dependent, highly sensitive sectors led to an immediate need for secure networks and more hardware. And the huge growth in online shopping and mobile banking—just two examples of the Internet of Things (IoT) boom—have placed even more demand on the semiconductor industry.

In August 2021, Jayshree Ullal , CEO and president of Arista, stated, “Everything from copper shortages and wafers to manpower, logistics, and freight has been impacted.” And while it’s expected that issues could ease in late 2022 , nobody can say for sure.

Semiconductor companies are responding to the shortage as best they can, but there’s no quick fix. For factories or manufacturing lines, the wait on orders is now typically four months ; introducing a new manufacturing line can increase this wait by up to six more months . And changing to a different factory means altering the specs, adding an additional year or more—especially if the chip has intellectual property that requires licensing.

Impacts on enterprise networking

Aside from the delays in network provisioning and growth which companies are currently experiencing, in a 2021 forecast report, Dell’Oro analysts stated, “Current semiconductor foundry capacity is not adequate to meet the recent surge in global demand. The cost of servers and other data center equipment is projected to rise sharply in the near term partly due to the global semiconductor shortages.”

Although semiconductor chip stock is slowly increasing again, Harvard Business Review warns that this pandemic-based shortage may not be the last. The authors, therefore, advocate resilience. One way to create this resilience is to “decouple software from hardware. In a chip shortage, for example, the fewer ‘hooks’ the product has into silicon, the better.” But how can you do this?


Virtualize your network to reduce hardware dependence

Semiconductor industries are experiencing their greatest profits ever . Andrew Lerner of Gartner reports “price increases as high as 25% to 30%, with most markups hovering around 10% to 15% as of the end of 2021 .” Network managers need to be cost-conscious, agile, and strategic. Their companies require fast, secure, and reliable ways to lessen the hardware dependence, and the best way to do this is to virtualize their network.

By reducing reliance on physical infrastructure and outsourcing equipment provisioning and maintenance, you can work around the impacts the chip shortage is having on businesses and improve your network agility.

A quick and effective way of doing this is to adopt as-a-service networking, where you plug into other vendors’ infrastructure without having to provision or maintain your own. The best place to start is to lay the foundation with Network-as-a-Service (NaaS).

As the name implies, NaaS is the system underlying cloud-based networking services, where a provider offers customers a private, virtually hosted path to their cloud service providers . A shift to NaaS should accompany a shift from viewing computer networks as primarily a capital expense to more of an operating expense – but overall a cheaper one as the NaaS provider will support network provisioning, maintenance, and growth.

Besides circumventing the wait for scarce network hardware and allowing your team to focus on their goals instead of scrambling to find overpriced components, using NaaS has a suite of other benefits:

  • Avoid locking into and paying for hardware purchases that may become obsolete—or on indefinite backorder—so you’re not paying for a sunk investment that doesn’t match growth. Match the pace of your network growth to that of your company to always have what you need, when you need it.
  • Leverage a provider with international data compliance and security certifications to access dedicated security features on a private network, reducing data risks and time investments from your IT team.
  • Get instant global connectivity when you use a provider with numerous global on-ramps for improved redundancy.
  • With the ability to integrate SD-WAN , virtual multicloud routers , and other networking features, get better network control and visibility (and potentially drive down costs even further).
  • With an on-demand provider, virtual connectivity enables you to scale bandwidth as you need it to better manage costs and ensure consistent performance.

Deploy SD-WAN for end-to-end virtualization

When it comes to last-mile network connectivity you have a few options, from public internet to dark fiber. But, as our comparison found , SD-WAN is the most agile choice for bringing the benefits of virtualization to the edge of your enterprise network – and there has never been a better time to adopt it.

Simply put, SD-WAN refers to virtual or Software-Defined Wide Area Networking, and offers “redundancy and connectivity choices, policy-driven route optimization, and traffic prioritization” , as well as bringing all the benefits of your NaaS setup to the end of your network. Secure Access Service Edge (SASE) goes one step further to add extra features to the mix, especially around security. This means your SD-WAN will be supercharged with elements like Secure Web Gateway (SWG) , Zero Trust Network Access (ZTNA) , or Firewall as a Service (FWaaS) , to name a few.

While SD-WAN virtualizes your network from end to end, there is one more step you can take to supercharge your networking abilities.

Find out how SD-WAN is leveling up in 2022.

Use Network Function Virtualization for your SD-WAN

Many SD-WAN providers will offer a Network Function Virtualization (NFV) service, like Megaport Virtual Edge (MVE) , as an add-on to their SD-WAN offering. The right NFV service optimizes the performance of your SD-WAN by reducing latency and jitter, and giving you the power to deploy SD-WAN gateways, virtual routers, and integrated transit gateways on demand. This reduces reliance on the public internet at every stage of your data’s journey, further safeguarding data and streamlining performance.

With NFV for your SD-WAN, you have more than just an end-to-end virtual network – you have an optimized network with a range of customizable features at your fingertips for unmatched business agility.

Learn more about Network Function Virtualization with Megaport Virtual Edge (MVE).

The question of security

When you switch to a cloud-based network solution, you should also change your approach to data security. Data breaches lead to huge corporate losses, and if you’re one of the companies hesitant to send your data into the virtual ether, know that virtualizing your data can be extremely secure if you’re with the right vendors.

It’s important to look for NaaS, SD-WAN, and NFV vendors that hold relevant international certifications (like ISO/IEC 27001 ), operate with regards to data compliance regulations in your countries of operation, and have a feature-rich security offering bolstered by a technical support team.

Find out how to keep your network safe with Megaport.

Where to start

If these steps feel like an excessive workaround to the chip shortage, remember: The benefits of virtualizing your network go far beyond the ability to avoid the pain of delayed hardware deliveries, and ultimately future-proof your entire setup. You might want to dip your toes in by simply starting with NaaS; but the more you adopt, the less you’ll have to rely on hardware—and be at the mercy of supply chains—to achieve your business objectives.

From better performance and security to a more flexible and manageable setup, virtualizing your networking will benefit your bottom line – even when astronomical chip prices come back to Earth.

Get scalability, security, and performance with Megaport’s NaaS. Book a demo today.

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