Router order delay shows scale of chip crisis

(Bloomberg) – Broadband providers are now facing backlogs of more than a year in internet router orders, becoming yet another victim of the chip shortage that clogs global supply chains and adds challenges for the millions. who still work from home.

Operators have received quotes with a delivery wait of up to 60 weeks, more than double the previous waits, according to people familiar with the matter, who asked not to be named because the discussions are private.

Running out of the correct router would prevent an operator from adding new subscribers to its network, risking losing sales in a highly competitive broadband market. Their supply chains have become a headache because abrupt manufacturing disruptions due to the coronavirus a year ago were exacerbated by a prolonged increase in demand for better home broadband equipment, said Karsten Gewecke, head of European regional business for Zyxel Communications Corp, a Taiwan-based router manufacturer.

Since January, he said, he has asked customers to order products a year in advance, because lead time for components like Broadcom Inc. chips has doubled to a year or more since then. Zyxel is a major router provider, with clients including Telenor ASA of Norway and Zen Internet of Great Britain.

Adtran, a US network equipment maker gaining market share from Chinese company Huawei Technologies Co. in Europe, has also warned customers about supply chain risks and extensions in recent months. It has expanded its warehousing facilities in the UK, more than doubling its inventory and logistics capacity to avoid problems, a spokesperson said by email.

No operator has completely run out of routers, but supply strain is anticipated over the next six months, so it is possible, according to Gewecke.

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Even shipments that were already on the way cannot escape the unforeseen events of world trade. Last week, the Zyxel routers were in and behind the Evergreen ship that blocked the Suez Canal, according to Gewecke.

Broadcom did not immediately respond to requests for comment. About 90% of its 2021 offer has already been ordered, Hock Tan, chief executive officer, said last month.

Zyxel’s problems began more than a year ago when a factory in China closed for a month due to COVID-19. Since its reopening, supplies have been erratic and shipping costs have skyrocketed tenfold from their previous levels as exporters scrambled to catch up, even competing for space with personal protective and medical equipment.

Strong demand for networking products has helped Zyxel’s parent company, Unizyx Holding Corp. Its shares have soared more than 181% in the last twelve months.

Since Chinese factories resumed their exports, there have been global bottlenecks in terms of chips, all stifled by shortages of parts like silicon foils and supply mismatches.

Semiconductor foundries struggle to allocate scarce capacity, and less profitable work is postponed. Routers have lower margins than smartphones and computers, and furthermore, in the world of routers, those destined for less affluent markets like Eastern Europe use less sophisticated and lower-margin parts. Similarly, smaller telecom operators have been hit the hardest, while global companies have secured supplies with their purchasing power.

Original Note: Sixty-Week Delay on Router Orders Shows Scale of Chip Crisis

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