U.S. telcos flag ‘cascading impacts’ from chip shortages

semi worker
One NCTA member estimated more than 5 million homes and businesses will miss out on new or upgraded broadband equipment in 2021 as a result of the shortage. (SIA)

A bevy of U.S. telecom groups warned the Federal Communications Commission (FCC) an ongoing global semiconductor shortage could slow network deployments and impede their ability to fulfill key requirements associated with certain federal programs.

Last month, the FCC put out a call for information about how the chip shortfall was impacting the communications industry, seeking details about its effect on lead times, costs, consumers and service providers more generally. Responses have flooded in, with answers filed by CTIA, the Telecommunications Industry Association (TIA), Rural Wireless Association (RWA), Competitive Carriers Association (CCA), NCTA – The Internet and Television Association, Verizon, Qualcomm, Mavenir and more.

RELATED: FCC asks how chip shortage is impacting communications industry

TIA set the scene in its reply, noting the shortage has “impacted nearly every element of the communications sector; from the telecommunications infrastructure side with products such as routers, switches, and base stations all the way down to the user terminal side with products such as laptops, desktops, and mobile phones.”

In its response, CCA similarly said its members have reported challenges sourcing both handsets and wireless networking equipment. While the impact of the chip shortage “varies from supplier to supplier,” it noted “at least one large supplier has informed CCA members and presumably other customers that it is unlikely to be able to fill all orders forecast for the year.”

“While CCA does not yet know whether these delays will impact upcoming deadlines and important Commission priorities, including the ‘rip and replace’ Reimbursement Program, CCA urges the Commission to be aware of the potential cascading impacts of these supply chain delays if they continue or worsen,” it wrote.

On the handset front, CCA said higher prices and a smaller selection stemming from the chip shortage have already “led to decreased device sales and are requiring creative solutions.”

RWA stressed smaller and rural operators are particularly at risk of being impacted by the shortage: “To date, large carriers have been insulated from the adverse effects of supply shortages due to their bargaining power and longer 5G lead times. In contrast, RWA’s small rural carriers, who are just beginning to focus on 5G purchases, are learning that 5G equipment is decreasingly available on customary purchase and delivery timelines.”

RELATED: Chip, workforce shortages raise worries for rural carriers

The group reiterated previously stated concerns that the combination of semiconductor supply constraints and a telecom labor shortage would hinder its members’ ability to replace network kit from Huawei and ZTE within a timeline set by the FCC.

In contrast, Verizon said in its response it has “so far been able to manage through the current market shortages” to maintain network deployments by actively managing inventory, extending demand forecasts and increasing lead times for product orders.

Broadband impacts

Meanwhile, NCTA warned the impacts on the broadband and cable TV industry have been “substantial and widespread.” It said its members reported lead times for semiconductors have skyrocketed from approximately 18 weeks in early 2020 to “50 weeks or more today.”

“When added to the time required to manufacture and transport devices, broadband providers now expect to receive new network equipment more than a year after orders are placed in some instances,” it wrote. As a result, NCTA said some broadband providers have been forced to “limit efforts to expand coverage to new areas.”

It added one of its members estimated “in 2021 alone more than five million homes and businesses will miss out on new or upgraded equipment as a result of equipment delays associated with ongoing semiconductor shortages.”

Similarly, TIA flagged “ripple effects” from the shortage which “are harming efforts to bridge the digital divide and expand access to high-speed internet to underserved communities, including communities of color and other economically distressed areas.”

What can be done

Verizon said it doesn’t think there’s much the U.S. government can do to alleviate the shortage in the short term, noting “any efforts to redirect production or sale of semiconductors to help one industry, will only lead to disruptions in other sectors.”

However, CCA and TIA both pressed the FCC to use its sway within the government to ensure critical communications providers maintain access to their fair share of scarce semiconductor supplies. TIA said it is “vital” for the FCC to assume such a role as champion of the ICT industry “given the push by some industries to leverage the federal government to direct semiconductor manufacturing toward particular end use.”

Noting a majority of the semiconductors used in the U.S. are assembled in Asia, CTIA cautioned the FCC to “ensure that the policies it adopts do not inadvertently restrict the U.S. telecommunication industry’s access to this supply chain” in the short term. Over the longer term, NCTA said the U.S. government (including the FCC) should use “targeted incentives” to help increase domestic production capacity “that will reduce or eliminate” future risks to the supply chain.

TIA added any long-term efforts to build foundry capacity in the U.S. should also aim to boost investment in semiconductor substrates, noting this component is “currently the largest constraint.”