High-speed Internet providers experience a delay of over a year when ordering Internet routers. They are yet another victim of the global chip shortage that is stifling supply chains around the world. The waiting period is now about twice what it was in the past – up to 60 weeks, according to Bloomberg’s sources.
Carsten Goecki, head of sales for Europe at Taiwanese router manufacturer Zyxel Communications, was telling customers in January to order goods one year in advance. Delivery times for components like Broadcom chips have been extended by more than a year.
Zyxel is a major supplier of routers. Its clients include the Norwegian company Telenor or the British network Zen Internet. US network equipment manufacturer Adtran has also warned its customers about delivery delays. To avoid problems, it doubled the amount of goods in the warehouse and the logistics capacity.
The operators have not yet fully encountered the routers. Goeck said the supply chains for the next six months are looking tense, so this is still possible.
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The problems stemmed from production disruptions during the pandemic, exacerbated by an increase in demand for a better home internet.
Broadcom Hock Tan CEO said last week that the company has orders for about 90% of this year’s offering.
The problems at Zyxel began more than a year ago, when its factory in Wuxi, China, was suspended for a month due to Covid-19. Since then, deliveries have been spectacular and transportation costs have increased tenfold as exporters try to catch up. The company even competed for space with personnel protection medical equipment and goods, intended for export.
Since Chinese factories were restarted, there have been no components such as silicon wafers and semiconductor base disks on which to form integrated circuits. There are problems when meeting supply and demand. Components in other systems, such as memory and power management, were also affected. “What we’re pushing in front of us is the snowball effect, and it’s only got worse since then,” says Goeck.
Semiconductor foundries have struggled to cope with scarce capacity and delay in less lucrative contracts. Requests for routers have lower margins than smartphones and computers. Routers designed for less affluent markets, such as Eastern Europe, use less complex components with lower profit margins.
So it is possible to continue. This has the biggest impact on smaller telecom operators, as global companies have secured supplies with their purchasing power. Some operators pre-stocked and, ironically, Brexit helped others, who had been building stocks for several months in fear of disrupting trade flows.
But some may rejoice. Shares of Unizyx Holding, Zyxel’s parent company, have risen 181% in the past twelve months due to massive demand.