Extended Lead Times
Arista Networks, one of the largest data center networking switch vendors and a supplier of switches to cloud providers, foretells that switch-silicon lead times will be extended to as long as 52 weeks.
“The supply chain has never been so constrained in Arista history,” the company’s CEO, Jayshree Ullal, said on an earnings call. “To put this in perspective, we now have to plan for many components with 52-week lead time. COVID has resulted in substrate and wafer shortages and reduced assembly capacity. Our contract manufacturers have experienced significant volatility due to country specific COVID orders. Naturally, we’re working more closely with our strategic suppliers to improve planning and delivery.”
Hock Tan, CEO of Broadcom, also acknowledged on an earnings call that the company had “started extending lead times.” He said, “part of the problem was that customers were now ordering more chips and demanding them faster than usual, hoping to buffer against the supply chain issues.”
Vertiv, one of the biggest sellers of datacenter power and cooling equipment, mentioned it had to delay previously planned “footprint optimization programs” due to strained supply. The company’s CEO, Robert Johnson, said on an earnings call, “We have decided to delay some of those programs.”
Supply chain constraints combined with inflation would cause “some incremental unexpected costs over the short term,” he said, “To share the cost with our customers where possible may be part of the solution.”
“Prices are definitely going to be higher for a lot of devices that require a semiconductor,” says David Yoffie, a Harvard Business School professor who spent almost three decades serving on the board of Intel.