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With no short-term way to solve chip shortage, distribution companies offer a solution

Creating enough semiconductor chips to meet current demand will take years. For now, chip distributors can shoulder some of the load.

AUSTIN, Texas — As the chip shortage lingers on, the U.S. is inviting more investment from semiconductor manufacturers.

While local manufacturers welcome the investment, any new construction will be a long-term solution to the chip shortage taking years to complete. Officials at all levels of government indicated there is really no short-term solution. However, some companies with operations in Texas said they may be able to alleviate the problem.

"We're more of a just a tourniquet, really more than a Band-Aid right now," Mark Pollard, president and CEO of Astute Electronics, said.

"From a short-term fix, I'd like to say there's hope. I don't want to be too pessimistic, but this is going to last a little while longer," Todd Snow, Global Purchasing Manager for Smith & Associates, said. "It's all unique. [Chips are] not created equally. So that's why there's not that short-term fix coming up, but manufacturers are doing the right things to try to mitigate this so it doesn't go into 2024 and 2025. But right now, it looks like 2023 is definitely a likelihood."

"[Solving the chip shortage short-term], that's quite impossible," said Jens Gamperl, founder of Sourceability.

The three companies compete against each other but all believe they have at least a temporary answer to help smooth the problem over until the supply of chips can catch up to demand.

These companies redistribute and broker computer chips and parts from companies that have a surplus to companies that need them.

"Whether it's an obsolete component or whether it's a part you just can't get for a really long time that you need, the only sensible route is to come to a trusted broker partner," Pollard said.

"You just got to make sure as a customer, you're partnering with the right company that offers the right elements of quality," Snow said.

The U.S. Department of Commerce is hoping Congress can move forward with bipartisan legislation to invite more semiconductor manufacturing investment to the country.

"The pandemic, I think, exposes just how reliant we are on chips when we couldn't get chips made quickly or there were supply chain challenges," Deputy Secretary of the Department of Commerce Don Graves said. "Last year, we engaged in a project getting a better handle on what was going on in the industry. We learned where there were challenges, where there were constraints in production and where there was some stockpiling, if you will, of these chips where it wasn't necessary."

These companies also deal in chips that are not used anymore. Many companies make products that have decades-long warranties, but the chip manufacturers may stop making the chips needed for those products before the warranties expire. 

That's where the distributors come in. Some companies will offload their excess, obsolete chips for a fraction of the price even though they may be needed later on. The distributors hold onto those products for a longer period of time in the event a manufacturer needs a particular make or model of a chip or part for a chip.

While the long-term solutions are in motion with investments across the country from Samsung, Intel and other manufacturers, the short-term solutions don't quite exist. These distributors bring a stopgap answer to the problem.

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