‘Chipageddon’ and the impact on securing new business tech


Chipageddon is a phrase that’s surfaced with regards to the Worldwide shortage of computer chips that has hit hard over the past year. This issue arose as demand for consumer electronics surged when lockdowns were enforced and particularly as the need for a mobile workforce and remote learning hit the globe.

So as with many of the current issues we’re faced with, the Coronavirus pandemic is partially to blame here. Demand for devices that not only allow us to continue with work and education, but also those that keep us entertained rose at record rates. Pair that with factories being shut down where chips are produced and it was a clear recipe for disaster.

Computer chips lie at the heart of quite literally all digital products and technology. Right now, we’re finding one technology company after another are warning that they face huge backlogs and constraints.

One of the early warning signs came when gaming companies Xbox and Playstation could not meet demand with their latest consoles and also as Apple had to stagger the release of their new iPhones.

Just before Christmas it emerged motor industry manufacturers including Volkswagen and Ford were facing severe issues, finding it somewhat impossible to source chips to build new cars. The sophisticated technology we find in today's cars often requires more than a dozen of chips.

The size of the supply chain impacted by this shortage is off the scale and we could argue there is no industry that is completely unaffected by this issue.

As we look to IT, we’re witnessing massive backlogs in orders for hardware such as physical servers and laptops. IBM have said they believe the shortage could last another two years and Cisco have also quoted that they see this being a real problem for the next six months, with realistic hope for improvement over the next twelve to eighteen months.

Our advice right now would be to place any future planned hardware orders for your business as soon as possible and to ‘get in the queue’. At present, we’re working to 20-25 weeks lead time with many of our vendors and the reality is we only expect this to further lengthen over the coming months. If you can source stock, even if it is of higher spec or cost than initially required, we advise not to procrastinate as it is likely to become unavailable within days, or sooner. Chances are the risk of not getting hold of hardware far outweighs the slightly higher cost.

It’s also worth noting that for two years from April 2021, companies’ investments in plant and machinery will qualify for a 130% capital allowance deduction, providing 25p off company tax bills for every £1 of qualifying spending on plant and machinery. The HMRC confirmed IT equipment like computer hardware is within scope of the super-deduction, provided its qualifying conditions are met. For instance the equipment must be new and unused.

We therefore welcome any IT projects that are being brought forward to in order to ensure completion within this deadline – taking into consideration current delays and shortages with chips.

If you have any questions regarding this topic, or would like any other IT advice and support for your business please do not hesitate to get in touch.

Leanne Kavvadia