Dive Brief:

• Technology companies are facing an industrywide component shortage that is driving up costs for manufacturers, executives from Dell and HP said on separate earnings calls last week. "We expect supply constraints to continue at least through the end of 2021," HP CEO Enrique Lores said on his company's call.
• Dell is prioritizing "more valuable places for" the components it is able to procure. The company plans to focus on fulfilling orders for "long term and better" customers, CEO Michael Dell said at an analyst conference Wednesday.
• HP noted it's taking steps to increase inventories and plans to sign longer-term contracts with suppliers, Alex Cho, the president of personal systems at HP, said at a different analyst conference this week.

Dive Insight:

If a company makes a product that relies on semiconductors in any way, it's likely dealing with the same challenges outlined by HP and Dell executives over the last week. The worldwide shortage has hampered production in the automotive industry.

HP said the semiconductor shortages affect integrated circuits. And Dell's backlog of new orders has grown larger than normal and "higher than we would like," the CEO said. But Dell has not seen this translate into a higher cancellation rate, as its lead times for customers have elongated as a result of the shortage.

As industries, particularly automotive, struggle with shortages, they've taken steps to try and find alternative suppliers, experts told Supply Chain Dive. And Cho noted that HP is similarly working with multiple sources of supply to help to mitigate the shortage.

HP CFO Marie Myers said the company is dealing with a shortage of resins it uses in its printing products.

The reality of multiple shortages at once is a result of high consumer demand driven by stay-at-home orders, along with plant fires and winter storms that hit production facilities. The combination means that manufacturers simply can't meet demand.

"Right now, certainly there is generally more demand than supply, and technology investments are highly prioritized by companies as it relates to their spending," Dell said.

Three months after the winter storm in Texas, the resin industry was still struggling when Ferriot, a contract manufacturer that works in resins, provided a market update.

"Most plants that were affected by freeze related shutdowns did not anticipate the shutdown having this high of an impact," Ferriot said. "As a result, most plants were unable to properly prepare production and machinery for what resulted in the shutdown."

Meanwhile, many onlookers witnessing the issues created by the semiconductor shortages have said it underscores the industry's need for more capacity. And the industry has heard the calls. The Taiwan Semiconductor Manufacturing Company plans to invest $100 billion over three years to increase its capacity, CEO C.C. Wei said in April.

But all of this new capacity will take time to come online. When it does, it could create the opposite issue: a glut of supply, Danny Blodgett, a senior research analyst at Omdia, wrote last week.

"It appears that the industry is building toward overcapacity right now," Blodgett wrote. "Just when these new fabs will be coming online, demand is likely to be back to more normal levels."