Semiconductors power the world. They’re key components in thousands of devices we use every day such as computers, smartphones, cars, gaming consoles and medical equipment. Semiconductors obey to Moore’s law. This means that the number of transitors on a chip doubles every 2 years, improving the speed and capability of devices.
The causes of the crisis
While many companies developped chips, few actually manufactured them, and temporary shutdowns of some manufacturing plants exacerbated the problem. Chip manufacture is capex-intensive, and the business is not configured to just ‘turn up the volume’ as needed.
The pandemic sparked the chip shortage. During the early months of the pandemic, semiconductor scarcity was fueled by stay-at-home mandates, which temporarily halted production and drove a massive surge in demand for consumer electronics and home appliances. The gap between demand and supply destabilized the industry’s structure in a way that was hard to fix.
SIM card plants were hit particulary hard because they were conditioned on investments. They offered SIM cards, considered low-end products, that were focal points of production 2 years ago, but whom have now lost their relevance. SIM plants have now reoriented their production to higher-value technologies (ex: eSIM) at the expense of SIM wafer production.
The industry has been impacted as a whole
- Chip scarcity inflated prices
Indeed, several companies involved in the supply chain tried to pass on the costs associated with the underconsumption in production. The telecoms industry is having to compete for supply with bulk buyers from many other industries, such as car manufacturers and smartphone developers, which buy billions of chips, and, consequently, mean cost increases are inevitable for them.
- These changes also inherently disrupted production patterns.
Governements are making a priority to reach self-reliance on the semiconductor market. According to Reuters, Intel has pledged $20 billion investment in Europe alone, and according to the Semiconductor Industry Association, it is seeking governmental support to do so. In the US, Joe Biden has pledged a $52 billion funding boost to support domestic chip production.
- The motor vehicle industry appears to have been hit the hardest
This can be attributed to the fact that the market segment continues to use legacy node technologies and are therefore not given the same level of priority as smartphone, PC or cloud infrastructure companies. Global production for passenger vehicles fell by nearly 1.3 million vehicles in the first quarter of 2021, which represents a 11.3% decline against the last quarter of 2020.
How long will the shortage last?
Shortage problems are expected to continue until 2023, at least. The industry’s demand for chips varies depending on node size. For example, a large-scale adoption of 5G would require a high number of radio-frequency semiconductors with larger sizes than auto-chips. 5G for consumer is set to take off next year, causing demand to increase even more in the years to come. This overlap shows that Operatos and OEMs are likely to continue to face a scarcity of chips in the years to come.
Semiconductor manufacturers can't solve the problem on their own
- Manufacturing semiconductors takes time, even in normal times. The wafer fabrication process takes 12 to 14 weeks and reducing this lead tile without expediting lead costs is practically impossible.
- A second major obstacle relates to the difficulty of adding new capacity. Building a new process takes 3 to 5 years, with an entry cost of up to $10 billion. Therefore, it is extremely hard to accommodate to major changes in demand from OEM customers.
Operators & OEMs need to reevaluate their strategies
Companies need to establish strategies across three different time horizons: immediate, near-term and long-term.
Immediate strategies should include:
- Working with suppliers who currently have large SIM supplies
- Working with suppliers who can help OEMs with their transitions towards eSIM, since eSIM is not impacted by the semiconductor shortage at the same scale.
- Ensure collaboration and exception management with their suppliers
In the near term (6-to-12-month outlook), Operators & OEMs ought to:
- Improve supply chain planning based on objective-driven customer allocations, to ensure customer satisfaction
- Increase collaboration across the value chain in order to orchestrate material flow with suppliers
- Establish a digital-driven strategy for their supply chain by dematerializing any elements that can be (such as SIMs)
Oasis Smart SIM's response to the current SIM shortage
Oasis Smart SIM has always been on the forefront of SIM card supplying for MNOS and MVNOs around the world. With more than 100+ operators having already worked with Oasis in the past decade, Oasis has taken this SIM shortage situation very seriously and is able to provide SIM card in this moment of shortage.
- A large quantity of SIM cards in all formats available for Operators around the world
Thanks to our strong relationship with Tata Communications and the large quantity of resources at their disposal, we have been able to secure a stable source of supply services. Oasis Smart SIM has access to a large quantity of chips that we are willing to sell to those lacking supply.
- A quick methodology of profile onboarding
In addition, we have developed a quick methodology of profile onboarding, which allows clients to be onboarded at a quick pace - to tackle any urgent demands.
- A SIM/eSIM approach
Although eSIM profile activation solves the problem by lowering the amount of chips required during daily operations, many companies continue to rely on SIM cards. Hence, our onboarding approach is to combine SIM with a gradual eSIM transition. Therefore, we can help operators to depend less on supply chain instabilities and develop a digital-first approach for both eSIM for Consumer & eSIM for IoT.
Oasis Smart SIM continues to work with our customers and develop initiatives to ensure there are sufficient SIMs in stock.
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