Over the past fifteen months, it’s become clear that while global supply chains are efficient, they’re also brittle. Unprecedented demand patterns during the COVID-19 pandemic led to shortages of toilet paper, hand sanitizer, and N95 masks. The pandemic also significantly disrupted labor markets and production. Pandemic disruptions have now revealed a brittleness in semiconductor supply chains that has been building for at least two decades, putting nearly all chips used in consumer products and industrial and commercial processes in short supply. Automotive ECUs, microcontrollers for factory automation, medical devices, gaming consoles, smart toasters—nearly everything requiring semiconductors—are affected.
Unfortunately, NFC, UHF RFID chips and NFC controllers are no exception to these shortages. Factories in China have reported price increases and dwindling supply for chips including the widely-used NXP NTAG213 as well as its less widely-used sibling NTAG215. The MIFARE Ultralight and Ultralight EV1 have long been more difficult to source, a problem that may be exacerbated by the current shortage. Production lead times are also increasing as a limited number of advanced semiconductor foundries are struggling to meet demand and shipping disruptions are causing delays.
From Chip to Tag
NFC chip shortages create downstream disruptions as chips are incorporated into final product NFC tags. NFC chips are bonded to antennas to create NFC inlays which are then converted into NFC tags in the form of cards, stickers, tokens, key fobs, badges, wristbands, and more. Custom products like NFC stickers and cards printed with custom graphics always have longer lead times than off-the-shelf products, but chip shortages mean that firms will need to plan even further ahead to keep custom tag projects on schedule.
GoToTags is taking action to ensure chip shortages have as small an impact as possible on our customers’ projects, whether they’re using off-the-shelf tags or creating custom tags. By planning ahead and thinking creatively, companies deploying NFC tags can avoid many of the problems posed by the shortage.
In this post, we’ll discuss why these shortages are happening now, why they’re affecting NFC chips, and the steps GoToTags is taking to insulate our customers from their effects. Most importantly, we’ll detail how firms deploying NFC tags over the next twelve to eighteen months should adapt their project planning to minimize the potential for unexpected delays.
Efficient but Brittle
In 2021, a global chip shortage is a major problem. A wide array of products now contain integrated circuits and unavailability of chips for these products is delaying their production. However, part of the reason for the shortage is the very supply chain innovations that helped make smart products ubiquitous in the first place.
Since the early 2000s, chips have been getting more complex, compact, and capable, and the tools and knowledge to manufacture them have been getting more specialized. The industry discovered that consolidating these advancing tools and knowledge sets into fewer, more specialized manufacturers offered significant cost advantages compared to a distributed manufacturing model.
Today, major chip companies like AMD and Qualcomm do still design their own chips, but outsource their manufacture to a handful of specialized foundries (many in China) like Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics. While NFC and UHF RFID chips are relatively simple, cheap, and easy to manufacture, consolidation means that in the midst of market disruptions, they are now competing with every other chip type for manufacture.
What the Industry is Doing
It has taken a pandemic for the semiconductor industry to reevaluate its consolidated manufacturing model, but the good news is that major semiconductor manufacturers are taking steps to insulate chip availability from future economic disruptions. Intel and TSMC are both building new fabrication plants in the US. Intel is also entering the market as a manufacturer of chips for other firms, offering more capacity and a domestic alternative to overseas fabricators more exposed to political and trade disruptions.
Chip foundries take time to build, so the security offered by these new projects may take a few years to be fully realized. Market predictions are difficult to make, but the next twelve to eighteen months of continued uncertainty may prove to be the high point of shortage-induced disruption.
What GoToTags is Doing
GoToTags is working to ensure our inventory of commonly used products remains sufficient to meet our customers’ needs. Tactically, we’re working closely with our network of suppliers to avoid price increases while maintaining availability. As we monitor the market for NFC and UHF RFID chips closely, we’ll continue to keep customers informed on how the ongoing shortage will affect projects and the actions they’ll need to take to insulate themselves.
Strategically, we’re strengthening our partnerships with chip manufactures including NXP, STMicroelectronics and EM Microelectronic to ensure a reliable supply of NFC chip wafers. As we continue to invest in more of the chip supply chain, we’ll have more control over availability.
We’re confident that most of our standard inventory products won’t become unavailable or face major price increases. Custom products including NFC stickers and cards will pose more lead time and availability challenges industry-wide, but many of these challenges can be managed. GoToTags will work with you to develop a strategy for your custom product projects, beginning with the first steps discussed below.
Starting Your Beat-the-Shortage Strategy
Fortunately, NFC and UHF RFID chips offer a certain level of interchangeability. If a chosen chip type becomes unavailable, we’ll work with you to understand your project requirements and match them to the features and capabilities of alternative chips.
For example, the NTAG213 chip is widely used and particularly exposed to the shortage, but NTAG215 and NTAG216 chips can cover its duties. Depending on memory requirements, the reverse is also true. NXP’s MIFARE series including the Ultralight EV1 can also substitute for many applications of NTAG series chips, as can chips from other manufacturers like STMicroelectronics. In most cases, there’s an alternative chip type that can meet project needs within their feature variations.
#2 Lead Times
Lead times may be up to two times longer than normal during the shortage. Planning far ahead is essential to the success of projects involving custom products. Now is the time for companies planning NFC and UHF RFID projects to meet internally and map their needs for the next twelve to eighteen months as best as possible.
GoToTags balances the capacity to support big customer projects with the personalized service of our small team of experts. As you start to define your needs for the near future, we invite you to contact us and continue the conversation about how you can beat the global chip shortage.
After more than a year of COVID-19 and labor market disruptions, increasing inflation, and generally unusual economic swings, a global chip shortage isn’t helping anyone’s sense of trust or security in global markets. The good news is that this crisis is weatherable both by individual firms who can plan ahead and by the industry. It’s leading to long term changes that may make chip availability more stable in the long run.