The issue has generated a ton of ink: In the midst of a worldwide pandemic, the global supply chain — the pipeline that includes every step in the creation of a product, from the extraction of raw materials to manufacturing, shipping, and delivery — weakened and cracked. And just as some relief appeared to be on the horizon, Russia invaded Ukraine, China enforced new pandemic lockdowns, and the problem deepened.
One of the weakest links in that supply chain? The “smart chip.” Those chips are in products that range from televisions to toasters, from dishwashers to diesel trucks. And obviously, the larger and more complex a product is, the more it leans on computer technology driven by those chips. Ask anyone who’s been in the market for a new car recently, and you’ll learn that the impact is hardly limited to electronics companies such as Crestron.
As Crestron’s COO Dan Brady explains in this article penned by Adam Forziati for CE Pro:
There are literally thousands of types of chips, starting with very simple things like chip capacitors and chip resistors, all the way up to the most advanced iterations from companies like Intel. But most chips start with silicon wafer fabrication, and there’s really only three big foundries in the world for that — and all three of these foundries are at 100% capacity, or even at 200%, given the worldwide demand for chips.
Waiting for the Wafers
The basic materials for those wafers come, in part, from Ukraine — which has been invaded by its neighbor — and the country Ukraine is at war with, Russia, which has been hit with a broad range of sanctions for its aggression.
All of this further impacted a problem that COVID had initially created. As Brady tells CE Pro: “[O]nce the pandemic broke, each of the facilities had to send their workers home for at least four months, and that created this huge bubble in the pipeline.” That, of course, meant there was a backlog even before the European conflict (and a new pandemic surge) began.
At precisely the same time, the demand for Crestron products was skyrocketing. From enterprises that needed to address a broad range of pandemic-accelerated videoconferencing needs to homeowners that wanted to improve their entertainment and automation options in lockdown, orders went way, way up. “[T]he the lead times for manufacturers to actually get ahold of the chips we need have expanded out to a year or even 18 months,” says Brady.
Fixing the Issue
Forziati’s CE Pro article was accompanied by a video conversation with Brady and Crestron’s Executive Vice President of Marketing, Brad Hintze. The full conversation (edited for length by CE Pro) saw Hintze laying out the Crestron philosophy:
In an effort to help our customers deal with this both end customers that are living with the technology and our dealers that are integrating it — we have opted to be transparent, which has worked well — and it's also caused some issues for us. On the side where it works well, at least our dealers and our customers know we're a partner with them. We're just trying to give them all the information that we have, but the downside of that is some of our competitors have not been that transparent.
In other words, if you’re being honest about a negative situation that’s impacting an entire industry, but your competition is less forthcoming with the same info, perception may not line up with reality.
Meanwhile, Dan Brady has been laying out a path forward in communications to Crestron’s dealers and partners. Solutions include (but aren’t limited to) partnerships with third-party suppliers, increases in investments in raw materials, warehouses, testing capacity, and staff. The strategy here? If a product is waiting for a single part that’s being manufactured off-site, ensure that everything else that goes into said product is ready the moment the missing element becomes available.
“Dan's jumped on many calls with dealers and customers to share all of this background information and just let them know it's going to be like this into next year,” Hintze continues. “For our part, we’ll continue to adhere to that old adage as we navigate this thing: Honesty is our best policy.”