The rising price of your industrial computer system in 2022
Author : Robert Plant | Sales Director | Impulse Embedded
01 June 2022
![Intel Corporation 11th-Gen-Evo [Image credit: Intel Corp]](../../global/showimage/Article/203279/ "Intel Corporation 11th-Gen-Evo [Image credit: Intel Corp]")
Intel Corporation 11th-Gen-Evo [Image credit: Intel Corp]
For system integrators & OEMs (original equipment manufacturers) who use industrial computers or IIoT (industrial internet of things) devices in their systems, it’s a safe bet that many will have seen price increases in their supply chain recently...
This article was originally featured in the June 2022 issue of EPDT magazine [read the digital issue]. And sign up to receive your own copy each month.
What can frustrate most is seemingly nonsensical price hikes without any proper explanation of the ‘whys and wherefores’ behind them. Industrial computers are constructed from a complex bill of materials (BOM), and the industry is underpinned by the principals of revision control, advanced product change notification and longevity of supply. When the pillars of our industry are threatened by instability in the supply chain, Robert Plant, Sales Director at industrial computing, embedded & IIoT solutions provider, Impulse Embedded tells us here, we all react in slightly different ways: some of us bend; some break; but the practical among us will review the current situation and ask what, if anything, can be done about it…
We are all aware that integrated circuits (IC) are in short supply; our world has come to rely so heavily on semiconductors that almost all of us will have felt the effects of the shortages. Parents scrambling to find stock of the latest PS5 (PlayStation 5) console, to those paying over the odds on the second-hand car market due to the demand created as new vehicle lead times continue to extend into many months and even years.
The current state of the market
But what is affecting our industry specifically? The industrial computing sector, where we more often favour reliability and stable supply over the latest cutting-edge technologies, is bearing the brunt of IC shortages, as continuity of components continues to be paramount. Surely, the demand for ICs is driven by automotive manufacturers’ desire to electrify and use leading edge memory and processors, or the likes of Intel and AMD pushing for 7nm technology? Well, that’s certainly a factor, but our reliance on interoperability, and the need to keep older machines up and running, actually plays a far bigger part than we might think.
![Intel Corporation embedded processor [Image credit: Intel Corp]](../../global/showimage/Article/203280/ "Intel Corporation embedded processor [Image credit: Intel Corp]")
Intel Corporation embedded processor [Image credit: Intel Corp]
Size matters
Chip manufacturers make their products from round wafers, which are classified by their diameter. The two main sizes of wafer in current production are 200mm and 300mm. In the 2000s, the semiconductor industry began to transfer its focus from 200mm to 300mm fabs, since although 300mm fabs are more expensive, they support more advanced technologies and allow chipmakers to innovate with their products – an example of which is Intel’s Tiger Lake processor family. Demand for 200mm fabs remained buoyant, however, and since there was still plenty of well-established 200mm capacity, supply was able to keep pace with demand. Fast forward a few years, to early 2020, however, and www.semiengineering.com reported that demand for 200mm fab capacity was again growing, and there were even warning signs of imminent shortages.
Price increases
Industrial computers and IIoT devices, by their very nature, use a lot of chips manufactured using the more established (mature node) 200mm wafers; chips like CMOS (complementary metal-oxide semiconductor) image sensors, display driver ICs, flash memory controllers, microcontrollers and power management ICs. So not only is demand increasing, as more and more devices become connected, but supply of these components has continued to worsen throughout 2020 and 2021, with resulting lead times for some critical components currently showing as long as 52 weeks.
Due to the global nature of the chip supply chain, it’s not only the manufacturing process that has been under pressure. Testing and transportation services share the burden of increased demand, but the COVID-19 pandemic has adversely affected worker availability, factory uptime and global logistic delivery times, due to reduced air and sea shipments.
Nikkei Asia published the table shown to illustrate the current price increases of legacy chips in 2021, compared to the same time in 2020. All these impacted chips are commonly found in the industrial computing and IIoT sectors.
Nikkei Asia table_electronics supply chain pricing increases
It’s no surprise then, that given the perfect storm of events converging over the past couple of years, prices are set to rise again in 2022.
Taiwan’s TSMC (Taiwan Semiconductor Manufacturing Company) has over half the world’s foundry market at their command, with their 200mm and 300mm foundries all churning out wafers at full capacity. In normal conditions, their services command a premium price, and with clients such as Apple, NVIDIA and Qualcomm all happy to pay it, TSMC have, until recently, been able to weather the storm, and held off increasing their prices, unlike many of their competitors, who have already done so. However, on October 1st, 2021, price rises for TSMC customers officially took effect, the effects of which will slowly filter through the supply chain in 2022, as existing contracts expire and the chipmakers are forced to adjust their prices accordingly. It therefore seems logical that the price for systems in the industrial computing sector is set to take a double hit throughout 2022.
What can we do?
This is a much harder question to field, as the answer really depends on the product in question, the chips it contains and the nature of the demand. For OEMs who have established product lines, with stable sales history, it’s much easier to forecast demand and put large back orders in place to hold current prices. But for system integrators, whose demand is more reliant on project work, it’s difficult to commit to larger covering orders, especially given the current economic uncertainty caused by a certain global pandemic and pressures on exchange rates.
This leaves a large percentage of industrial computing and IIoT product users in a position where they need to react to demand, quickly consider alternative products or be creative with supplier purchasing agreements to stay ahead of the curve. One such example of supply chain creativity is to question the product vendor about which chips are causing extended lead times, and whether the vendor is willing to purchase chips on the spot market to mitigate the delays. The nature of the more established chips in IIoT products means that chip distributers tend to stockpile them, and while this increases the price, for those willing to pay the increase, the resulting trade off reduction in lead time can often make good commercial sense.
![Intel Corporation 10 nm wafer [Image credit: Intel Corp]](../../global/showimage/Article/203281/ "Intel Corporation 10 nm wafer [Image credit: Intel Corp]")
Intel Corporation 10 nm wafer [Image credit: Intel Corp]
Being flexible on specification is another weapon in the armoury to consider. A great deal of time is spent on arriving at the perfect hardware specification, and while software resource is consumed in the product development cycle, often an alternative hardware platform, with a similar specification, can be sourced and migrated to without too much upheaval in the process.
Regardless of how frustrating the current situation might be, working together, forming better relationships with suppliers, and having trust in the information at our fingertips, seems to be the only way to weather the storm. One thing is for certain: those who do little to prepare may have an unpleasant surprise in store next year, as the rest of the industry is set to hunker down and do what they can to keep the wheels of industry turning.
Get in touch with your supplier
For hardware requirements in upcoming projects, no matter how far in advance the expected delivery date, it is certainly worth speaking to a specialist industrial computing system provider, such as Impulse Embedded, to ascertain the impact of this global components shortage on the supply of all required products. Impulse Embedded will be happy to discuss the implications of any delays, and how they may affect you, and can usually help mitigate these delays, using its decades of industrial computing experience and dedicated, trusted partnerships with global computing manufacturers.
Talk to Impulse Embedded on 01782 337 800 or visit its website at: www.impulse-embedded.co.uk
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