- The global semiconductor chip shortage is causing delays, order cancellations and other supply disruptions at medtech companies, according to a study commissioned by AdvaMed.
- Deloitte, which conducted the survey, found all respondents have experienced some level of disruption to their chip supply chain, with delays ranging from two weeks to more than one year.
- AdvaMed used the findings to push the Biden administration, Congress and semiconductor manufacturers to prioritize the supply of chips to medtech over other industries that use the components.
The ripple effects of COVID-19 and other forces have combined to constrain the supply of chips that are essential to a wide range of products across multiple industries. One study found the supply disruption is affecting 169 industries and carmakers, which are predicted to take a $210 billion sales hit this year.
Evidence of the impact on medtech emerged over the summer, when ResMed cited the shortage of semiconductors as a reason it will be unable to meet all the demand created by the recall of devices by its competitor Philips.
ResMed CEO Mick Farrell said he is calling suppliers and saying: "Look, this component can go into a cell phone or a car, or it can go into a medical device that literally gives someone the gift of breath. Please prioritize our part of the supply chain."
Deloitte does expect the situation to start improving later this year. The forecast is based on evidence that companies in various industries, including medtech, are over-ordering to build up buffer stocks. Once companies amass enough chips to feel comfortable, demand should fall and begin to normalize lead times.
AdvaMed wants the prioritization of medtech to be baked into government policy. The trade group previously wrote to Secretary of Commerce Gina Raimondo to "urge the administration to implement policies that benefit all technologies, including those with medical applications, without prioritizing one industry over another." The latest statement goes further.
Scott Whitaker, AdvaMed CEO, called for the medtech supply chain to be "prioritized and protected" after reviewing the findings of the Deloitte survey.
The survey found two-thirds of medtech companies use semiconductors in at least half of their products. Deloitte found the second and third-generation chips used by carmakers and high-tech manufacturers are "primary needs" for medtech, putting the industry in direct competition with other sectors.
More than 70% of respondents rely on a single supplier for their semiconductors, the survey found. The lack of a backup means disruptions can stop companies from making medtech devices, and all respondents have faced disruptions.
Some of the delays are as short as two weeks but big setbacks are happening too. One medtech procurement lead said: "Initially we were told we need to issue purchase orders until 2023 but that doesn’t seem to be enough to secure supply anymore."