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Realtek Chip Shortage Bodes More Delays for an Embattled Components Market for PC

Realtek Semiconductor Corp, one of the largest fabless semiconductor companies globally, has extended its delivery time to 32 weeks.

That is slightly longer than a 7-month delivery period, caused by the ongoing global silicon shortage – the most abundant material in the Earth’s crust used to make chips and printed circuitry.

This has caused a huge backorder that’s now affecting the PC industry, and several other branches, given that Realtek’s chips found their way into a wide variety of products.

Realtek Chip

For example, their audio+LAN chips are primarily used in notebooks, though some of their chips, like the xDSL series, are employed in “smart city” projects under the leadership and supervision of Samsung.

Perhaps the most problematic is the company’s shortage of networking chips we use to drive our communications.

Reportedly, Realtek is struggling to meet the demand for Ethernet chips and switches for wired networking and Bluetooth communications chips for other types of devices.

This wouldn’t be as worrisome, given that alternatives exist, but Realtek supplies up to 70% of audio+LAN chips used in the global notebook market.

Not to mention a large portion of wired communications devices used in desktop PCs, like PCI and even onboard Ethernet cards and chips.

Naturally, the manufacturers could opt for alternative chips from other manufacturers, but that would be a costly and time-consuming process. Using different chips would require redesigns off all the boards whose chips would’ve been mounted on.

That process would end up costing tech companies more money than global delays in production and shipment caused by the worldwide chip shortage.

Admittedly, Realtek isn’t the only company that took a hit. Everything is moving slower when it comes to consumer electronics. Tech giants like Sony and Microsoft have a tough time meeting the market’s demand for their respective entertainment systems.

At the same time, PC manufacturers continue struggling to procure CPUs and GPUs – whose price continues to skyrocket due to the aforementioned shortage and cryptocurrency mining.

Regardless, we’re discussing a chain reaction. It was only a matter of time for Realtek to become affected, and it didn’t take long for the company’s delay to affect notebook manufacturers, such as HP, Dell, and others.

Many of these notebook manufacturers have pressured the company to ship out more chips and meet the demand – something that currently seems impossible by all stretches of the imagination. Even Apple, the world’s most valuable company, is affected by Realtek’s disruption in the supply chain.

Most of these companies will have to wait for Realtek’s chips because the shortage affects other chip manufacturers.

Intel, one of the few companies in the world that own semiconductor foundries, is also one of the better-placed companies that manage to keep up with the demand, compared to companies that out-source production.

Semiconductor Manufacturing

But with only a few of the industry’s top players in such position, the rest of the semiconductor manufacturers are left to deal with the same issues as Realtek Semiconductor Corp.

In the end, it might take an entire year or even more for things to go back to normal and for supply to finally satisfy the demand. The problem was initially caused when the global automotive industry temporarily shut down production lines, canceling ordered chips used in car electronics systems.

This caused chip foundries to reassign their spare production capacity for the remainder of the year to consumer electronics companies, targeting smartphones, laptops, and gaming devices – the demand for which surged during the pandemic lockdowns.

However, nobody expected car sales, and subsequently, the automotive industry, to bounce back as fast as they did. And while car manufacturers were ramping their orders, chip foundries had to reassign production capacities, which can take months, to meet the demand.

This caused an opposite effect, resulting in a delay that caused a global semiconductor shortage, which can’t be addressed overnight despite all the efforts.

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