Microchip Shortage! Now what?

Microchip Shortage

Need to Upgrade Your Merchants to 4G but affected by the global payment device Microchip Shortage? Short answer, of course you do! Apriva is here to assist you with that. But how? You’re thinking, umm remember we do have that global Microchip Shortage going on.

So, here’s the 411 – did you know, Apriva is a unified payment platform? What that means for you while we’re in this Microchip Shortage is our payment app AprivaPay, which enables both mobile and register payment acceptance, allows merchants to accept in-person payments with a payment device. But it can also be used to send customized digital invoices, or in tandem with a web browser as a virtual payment device to accept payments without a physical POS system. This could be pretty convenient while you wait for your POS device, right? Also, we currently have access to immediately available Bluetooth payment devices starting at just $65 each. Contact us to get started today!

What is AprivaPay Mobile? In case you’ve forgotten, let’s take a quick walk down memory lane:

  1. Use with iOS, Android, or Amazon mobile devices to accept any payment type – with or without a POS device.
  2. Add a promo, or featured product to the customer bill on the spot.
  3. Schedule recurring visits with subscription billing.
  4. Finish the job and accept immediate payment via swipe, dip, tap, or mobile.
  5. Commercial build? You invoice your customer right from the AprivaPay app.

So back to the Microchip Shortage. As we have seen the global supply chain shortage on everything, we have identified the ultimate pain point, as the Covid-19 Pandemic. Wow, I can hear the collective sigh from here. So now, almost 3 years later, and now our POS Terminal Microchip Shortage is on the rise. The Microchip Shortage, which has largely centered on the microcontrollers within POS terminals, has become so acute some terminal makers have reportedly run out chips for specific models for a quarter of the year or longer. This is the problem, this is our reason for the Microchip Shortage. 

In the nearly two years since the chip shortage began, it has spread to manufacturers across the world. Now, lead times for POS terminal orders remain on the rise as manufacturers scramble to raise production to meet demand. During the past year in particular, lead times for orders have jumped dramatically. In some cases, terminal distributors are quoting 26 to 30 weeks for orders vs. pre-Covid, took 12 weeks to fill.

How well terminal makers have managed the Microchip Shortage so far depends on a variety of factors, including inventory levels before the Microchip Shortage began and the demand for a particular terminal model. Meaning different manufacturers and different terminal models or product lines can have very different amounts of availability. Typically, the most popular models may have significant more inventory than the models which are not as popular and may have much longer lead times. If you know your customer’s expectations and have highly accurate forecasts, you’re one step ahead of the Microchip Shortage. The key to managing customer expectations is transparency. 

Accurate production forecasts start with having strong relationships with chip manufacturers to determine their actual monthly output. Even then, terminal makers can struggle to minimize the disruption to their business. While sourcing components from a new supplier as needed can help terminal makers keep up with demand, it is not always a practical solution as POS terminals have to meet processor and payment-network certification requirements. If a chip sourced through a new supplier does not meet those requirements, it can take months to receive certification, which only slows production further.

Freight carriers have had their business disrupted too, which in turn is slowing delivery not only of Microchips but of terminals as well. While sea and rail carriers, many of which were idled for weeks or months in 2020, are returning to normal operations, a lack of available space and cargo containers, as well as increased shipping timeframes and costs, are feeding the Microchip Shortage.

This continued mismatch between demand and supply is pushing lead times even longer. As of December 2021, lead times for most semiconductors — no matter the type — are running 40 weeks or more. Essentially no waits are shorter than 28 weeks, but most are far longer.

Despite the bleak near-term outlook of chip production, the Microchip Shortage has not had a crippling effect on the payments industry. Nevertheless, to weather the logistical issues and production delays the Microchip Shortage is causing, there are several steps terminal makers, distributors, and especially payment-technology providers that sell terminals, can take.

  • Alignment: Your company’s product design teams should stay aligned with your suppliers’ technology roadmaps and capital investment plans to increase your chances of getting necessary components when you require them.
  • Supplier qualification: For common products, have multiple approved suppliers and continue to add to that list as suppliers grow their capabilities and offerings. Review and consider suppliers’ global footprints as part of the qualification process to mitigate risks that might arise from having suppliers concentrated in a particular region.
  • Visibility: Provide as much visibility as you can to your suppliers so they can plan their product capacity and any potential longer-term capital investments. With some suppliers looking for 12 to 24 months of visibility, as soon as it’s feasible, place long-term orders for the end of 2022 and into 2023 to enable better visibility for wafer and capacity planning.
  • Increase lead times in planning systems and additional buffered inventories: With lead times increasing for most commodities, update your planning systems to reflect those delays accordingly. Pull-ins and support for unscheduled orders will be very difficult.

The pandemic has thrown the global supply chain into disarray. But the challenges of the past few years have also revealed its deep interconnectedness and thus emphasized the critical importance of strong supplier relationships and a prepared, resilient supply chain and procurement strategy. Wherever the chips fall this time around, it’s always prudent to have a plan.

Remember, navigating the Microchip Shortage requires planning & communication. With Apriva you can accept payments wherever your business takes you with or without a payment device.