Global chip shortage hits Cisco supply chain

CFO Scott Herren said that issues will last until at least the end of 2021

Cisco has confirmed that its recent supply chain disruption has been a direct result of the larger global semiconductor shortage.

Chief financial officer Scott Herren estimated during an earnings call on Wednesday that the supply chain issues, which are impacting the forecast for the current quarter's adjusted gross margins, could last until the end of 2021, with a possibility that they would extend until 2022.

“I think the supply chain issues will stay with us at least through the end of this calendar year,” he told the attendees, adding that Cisco had “locked in both supply and pricing with some of the key component providers”.

Although no specifics were given during the call, a spokesperson for the company has since confirmed to IT Pro that the supply chain issues were related to the global semiconductor shortage, which has been plaguing the tech and automotive industries for the duration of the pandemic.

“Due to material shortages across the semiconductor industry that are outside of our control, Cisco is experiencing extended lead times on select components. While the impacts are not broad-based across all Cisco products, there are some delays to production schedules for certain product families,” the spokesperson told IT Pro.

They added that the situation is expected to last through the end of our current fiscal year and into the next as efforts to expand capacity are realised and demand stabilises.

“Cisco has and will continue to be proactive in mitigating the impacts of these supply constraints and we are working closely with our network of suppliers and manufacturing partners to minimise delays and expedite orders for our customers,” they added.

The confirmation comes weeks after CEO Chuck Robbins told the BBC that it would take “another six months to get through the short term” of the global chip shortage, adding that the crisis is unlikely to be fully resolved until 2022.

"The providers are building out more capacity. And that'll get better and better over the next 12 to 18 months,” he said, adding that the shortage was caused by unprecedented demand for semiconductors, which “go in virtually everything”.

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The shortage is what might have prompted the company to acquire fabless semiconductor company Acacia Communications, the finalisation of which was announced on Wednesday. Cisco also reported a 10% year-on-year growth in total orders, representing the strongest demand in its products for almost a decade.

The company generated $12.8 billion in revenue, up 7% year-over-year, with continued momentum in transforming its business to software and subscriptions. According to the company, 81% of software revenue was sold as a subscription, up from 76% last quarter.

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