The past couple of years have seen unprecedented pressure on the global supply chain for electronics. The pandemic, manufacturing problems, shipping delays and even the weather have caused shortages in microchips, data storage and other electronic parts.
As a result, customers face waiting times of months, or even years, for critical IT hardware. That has hit enterprise storage procurement hard, as it is so hardware-dependent. Although the supply situation is improving, CIOs need to look again at how they source new hardware and how the business uses existing equipment.
Supply shortages
Hardware shortages have affected whole systems, from servers, network switches and storage arrays, to critical components.
These range from hard drives and SSDs to smaller parts. Much has been made of the global shortage of microprocessors, but manufacturers also face shortages in other integrated circuits, especially for power management, and even in capacitors and resistors, and analogue electrical components.
This impacts suppliers at different levels, depending on where they sit in the hardware ecosystem and on the robustness of their own component supply chains.
For hardware makers, component shortages either force prices up or delay shipments.
“It has been referred to as the chip shortage, but actually it can be the smallest little 10 cent or 50 cent component that causes you a headache,” says Patrick Smith, field CTO for EMEA at Pure Storage.
“It’s not just chips. It’s all sorts of ancillary components that you absolutely depend on when you’re producing a storage array, server or network switch.”
IT directors say lead times are slipping to between six and 18 months. Before the pandemic, they could usually source hardware in a few weeks.
For suppliers, delays on upstream components can be even longer. Last year, for example, some manufacturers reported semiconductor lead times of 40 to 60 weeks, which is about twice as long as before the pandemic.
The situation has since eased somewhat, with post-pandemic spending levelling off and a poorer economic outlook dampening demand for business investment, including IT.
But it will take time – perhaps another year – for improved component supplies to work through to better system availability for users.
Causes
Just as there is no single supply shortage – with problems affecting most types of electronics – there is no one single cause.
The global microchip shortage is well documented, and started before the pandemic. Problems include increased demand from some sectors, including car makers, over-reliance on a few manufacturers, factory fires, water shortages in Taiwan and contaminated materials. The latter problem hit the solid-state storage business hard when it forced the scrapping of 6.5 million terabytes of 3D NAND flash.
Factories were also hit by Covid shutdowns and staff sickness. The pandemic also hit global shipping, making it harder and costlier to move components.
In addition, suppliers say manufacturers have favoured supplying the large hyperscalers, which rely heavily on “white box” components. Hyperscalers, in turn, increased their own purchases to meet demand for cloud services during lockdown.
Hardware, and storage hardware, problems
Users and suppliers report issues sourcing solid-state storage and spinning disk drives, as well as on sub-systems. Even more mundane parts, such as housings and casings, are also subject to delays.
IDC, for example, reported hardware shortages in 2021 and in the first half of this year, but a gradual easing since. Supplies of SSDs and hard drives tightened in 2021 and earlier this year. Availability has improved since, however, with manufacturers and cloud providers holding more hard drives in their inventories, according to Edward Burns, who covers the hard drive market at IDC.
Weakening demand for SSDs and HDDs has also helped.
“In the first half of 2022 we saw shortages for SSDs as a result of strong demand, IC shortages, and a fab outage at WD/KIOXIA,” says Jeff Janukowicz, IDC’s SSD analyst. “SSD pricing did increase due to the shortages… However, as we moved into the second half of 2022, demand has slowed to due macroeconomic issues, and as a result, the shortages have subsided for SSDs.”
The situation downstream, however, is improving only gradually, with customers reporting ongoing challenges and rising demand.
“Previously, we used to wait two to three months for a hardware component. We are now having to wait a year or more,” says Seva Vayner, director of edge cloud at Luxembourg cloud services provider Gcore.
“These shortages affect every component – physical discs, disc enclosures, servers, controllers… I’m not sure people understand the extent of the issue either. All those video calls workers record, and the heavy-duty files people routinely send to colleagues and customers, put a lot of strain on storage infrastructure.”
This is echoed by Oscar Arean, technical director at UK-based cloud and disaster recovery provider Databarracks.
“It’s very far-reaching. Servers, switches and firewalls are all significantly affected,” he says. “Hard drives, excluding SSDs, are becoming more readily available. However, this is dependent on stock held by resellers. In most cases, suppliers are unable or unwilling to provide an expected delivery date because they are not sure these will be honoured by their own suppliers.
“The effect is that from when you make the decision to kick off a project, you can wait for more than six months before you receive and can start racking that hardware.”
And, as IDC reports, component shortages continue in networking hardware, with analyst Brandon Butler saying this has pushed lead times from “weeks to multiple months”.
With so many storage projects dependent on networking, customers face delays even when they successfully obtain storage hardware.
Fixing the supply challenges
The situation has prompted suppliers and customers to look again at purchasing processes.
As Pure’s Smith notes, SSDs are now “very well-supplied, even over-supplied”, and by maintaining strong relationships with suppliers the supplier has kept lead times in “single-digit” weeks.
But he concedes that for CIOs trying to build complete systems, this only goes so far. He expects firms to revisit disciplines such as demand planning and IT resource consumption.
Supply shortages will also prompt firms to look harder at the hardware they have and how it is managed, suggests Tony Lock, analyst at Freeform Dynamics.
“Are there things you can do to reduce your storage footprint?” he asks. “Go out and find out what you have got, and see if there are better ways of storing it. Can you deduplicate it, or move some of it to cold storage to free up other platforms?”
Firms could also look at extending support for older hardware, or sourcing second-hand kit, but they should also reassess short-term project priorities, to see if upgrades can be streamlined, or delayed.
“It takes time, and it takes conversations with your suppliers and inside the business,” says Lock.
