Last August the Biden Administration signed the CHIPS and Science Act into law to accelerate U.S. chip manufacturing and technological competitiveness with China — a $280 billion investment with $11 billion pooled into chips research, while another $39 billion to construct domestic semiconductor facilities.
The law was a first step in sedating the supply chain havoc the U.S. was experiencing for some time with semiconductor chip shortages, which continues to put hardware for enterprise IT infrastructure in hot water — the reality simply being you can’t have one without the other!
Still in a chip-deficit today, Silverlinings asked Steve Watt, senior vice president and chief information officer at Hyland, on the implications of the chip shortage for organizations moving or already home to a cloud environment… and what to expect for the foreseeable chip-choppy future. Read on to catch up on our Q&A:
What are some of the bigger challenges orgs will face due to chip shortages?
Networking equipment, servers and other IT systems all require semiconductor chips, thus a chip shortage poses a significant threat to the supply of hardware for enterprise IT infrastructure.
The chip shortage “can also create delays in upgrading or expanding existing infrastructure, difficulties in acquiring new equipment, increased prices due to supply and demand dynamics, and potential bottlenecks in IT operations,” explained Watt.
The kicker though, is that a chip shortage is particularly problematic for organizations incorporating AI and ML technologies, since both require large amounts of computing power which is fueled by… yep, semiconductor chips.
“Enterprise IT organizations utilizing tools and innovations in machine learning and artificial intelligence, or data-heavy workloads may experience difficulties,” according to Watt. And, “a disruption could present widespread negative consequences to these business outcomes,” according to Watt.
Speaking of AI, when asked if the shortage could signal a shift in the current AI war happening between providers, Watt forecasts that there will be a continued investment in, and a shift in the speed at which providers attempt to differentiate themselves in the AI market. “Which can happen through organic innovation or strategic partnerships, like we have seen with Microsoft and OpenAI.”
How does a chip shortage influence the cloud market?
With chip-reliant hardware in trouble, it may be time to re-think on-premise equipment, according to Watt, and take a closer look at the avenues cloud adoption could open for an organization.
Already, the current chip shortage has “definitely affected the cloud market,” according to Watt, and “can be an accelerator for cloud adoption.”
“When you couple removing the hardware component and offloading the administrative burden for the solution, that’s when the advantage of a cloud platform becomes evident.”
Chip shortages will likely increase cloud adoption, and Watt pins cloud migration as “a viable and effective option,” even if temporarily. However, “we know a bad cloud adoption plan can lead to significant and inefficient cost growth, which can be painful in the short and long term.”
Watt predicts that businesses will start to invest directly into cloud platforms versus cloud infrastructure — “those economies of scale are usually much better and present more benefits, as the infrastructure necessary for platforms is run by the software vendor with efficiency and scale in mind.”
Watt doesn’t expect the push for cloud adoption to be reflected in price from providers — “it’s not about who can host a VM the cheapest, but it might be which cloud platform can deliver the most expansive set of generative AI tools.”
When will the chip shortage see relief?
“There is a lot of concern about the explosion of AI continuing to push shortages, especially in the realm of GPUs which are critical to those workloads,” said Watt. “I anticipate the shortage will continue for the time being.”
While legislation like the CHIPS and Science Act will likely help the chip shortage in the long-run, it may be too early to hang onto the legislation as a sole crutch.
“In the short-term, IT leaders still need to be prepared for disruption,” concluded Watt. “The legislation has already proven it will impact several large-name manufacturers like Intel and Micron comitting to multi-billion dollar fabrication plants here in the United States.”