The Chip Shortage and How it’s Going to Affect RFID

If your company relies on semiconductors, which most medical device companies do, then you have probably heard of the current shortage that is plaguing industries from healthcare to computing to transportation and even defense. Since many of the applications for RFID are deemed less critical, supplies of RFID inlays and tags are now showing lead times of up to 24 months.  Intel CEO Pat Gelsinger recently spoke on why he believes this shortage will continue into 2024 saying, “global chip crunch may drag on due to constrained availability of key manufacturing tools, serving as an obstacle to expanding capacity levels required to meet elevated demand.”

Since around 2004, RFID or Radio Frequency Identification has been incorporated into many branches of healthcare. From tracking medical devices to keeping track of actual patients, RFID tags have utilized radio-frequency electromagnetic fields to track data and manage inventory. RFID technology has grown exponentially since then and is only expected to grow in demand. According to Emergen Research, the global RFID market is expected to grow up to $12.89 billion by 2027. The recent chip shortage threatens not only that projection, but has contributed to the current inflation in the U.S. economy and the ongoing pressure of hospitals to keep up with the overwhelming demand of the aging population and the shortage of staff. 

The outlook of a multiple years-long shortage has companies like Globalwafers and Sumco, big names in Si wafer manufacturing, looking to add significant capacity. According to EE Times, Globalwafers is expected to invest about $800 million in boosting production efficiency at its 12-inch fabs, while Sumco is expected to invest 201.5 billion yen ($1.75 billion) to build a new production factory. Of course throwing money at the problem helps, but it will still take time for chip users to see the impact. Most of these companies are raising their prices to combat the increase in price within their own supply chain. The price hike hasn’t deterred the demand for these chips. Whether or not we like it, most technology relies on these chips in one form or another. Unfortunately, to keep margins in the positive, each company will have to pass on the cost to their buyers until it hits the average person. 

This shortage didn’t happen overnight, in fact, this has been at least three years in the making. A survey performed by the U.S. The Department of Commerce found that, “Median demand for the chips highlighted by the buyers who responded to the RFI (Request for Information) was as much as 17% higher in 2021 than in 2019, and buyers aren’t seeing commensurate increases in the supply they receive.” This demand wasn’t just caused by the COVID-19 pandemic, but also the increasing demand for more semiconductor based technology such as electric vehicles, 5G and of course, medical device manufacturing demands. Even though the medical technology industry only accounts for 1% of semiconductor supply, the need is quite literally life changing. 

Some medical experts say that situations like these are exactly why the industry should be wary of heavily relying on systems that require chips. There are tiny, autoclavable RFID tags for surgical instruments, but safe and reliable tags for implants have a ways to go. Recently, WebOps has teamed up with VisiTouch, which uses clickable images to rapidly identify items, record consumption, and replenish non-sterile implant kits and instrument sets, bypassing the need of an RFID tag. 

In the meantime, industries that rely on chips are waiting on pins and needles as Congress has yet to fund the CHIPS act, which would provide more than $52 billion to companies like Intel and other U.S. semiconductor manufacturers to build more factories. Unfortunately due to other provisions in the package lawmakers have stretched out this largely bipartisan supported measure. While those on Capitol Hill continue to negotiate an increasing number of U.S. based companies threaten to take their businesses overseas or face an even larger disparity between supply and demand.