Wireless LAN supply chain shortages: Vendors struggle to deliver

The coming 802.11n ratification and shifts in the global economy have led to WLAN chipset shortages. With chips and other components in short supply, some enterprises will have to wait for their new access points.

Wireless LAN chipset shortages and other supply problems could lead to a long wait for enterprises that are looking to buy new wireless networking gear.

If you ask your WLAN vendor sales representative about trouble in the supply chain, he will probably give you a song and dance about how his company is managing inventory in a way that will avoid delays in delivering on orders. But the fact is that many vendors have felt or are feeling a pinch.

"We had some tightness with our suppliers, particularly those in China, in the [second] quarter, but nothing that affected our sales," said Brian Johnson, spokesman for Trapeze Networks. "We tightened up on some inventory, but we got through it. We were able to call in a lot of favors and use the leverage of our OEM partners to keep supply coming in. We ended the Q2 with very little inventory, but we made it through fine. From what I've heard, some of our competitors did have issues, but you'll have to bring that up with them."

Other vendors are seeing delays in WLAN components across the board.

"While Ruckus isn't having a hard time getting chips from Atheros for our boxes, we've seen a general increase in lead time from component manufacturers across the board," said David Callisch, vice president of marketing for Ruckus Wireless.

Linking the problem to a heavy increase in orders -- not a short supply chain – is another vendor explanation.

"For the past several weeks Aruba has been experiencing exceptionally heavy order volumes," said Michael Tennefoss, head of strategic marketing for Aruba Networks. "As a result, our lead time for some shipments has increased, and our order backlog has grown. We've been working diligently to further boost production and expect to return to normal order delivery times on or before the end of the month. We have not experienced the RF chipset shortages reported by some other wireless LAN vendors, which perhaps reflects differences in our respective supply chains or inventory management programs."

Surprise uptick in sales rattles WLAN supply chain, stunts growth

Regardless of how vendors explain the problem, supply chain issues have stunted growth in the WLAN market last quarter as semiconductor manufacturers struggled to deliver enough parts to WLAN vendors. Tam Dell'Oro, president of market research firm Dell'Oro Group, said that supply chain issues stunted growth in the WLAN market last quarter as semiconductor manufacturers struggled to deliver enough parts to WLAN vendors.

The global recession is partly to blame, she said. A steep drop in wireless LAN sales beginning late last year caused vendors to cut back on the amount of parts they ordered from suppliers. The suppliers were forced to cut back on production. Then demand for wireless LAN picked up again and the supply chain wasn't ready for it.

"In this particular area, the comeback is happening faster than what people expected," Dell'Oro said. "It's the government stimulus programs that are trickling into orders."

Dell'Oro said the healthcare industry in particular is spending a lot on wireless LAN technology as it looks to modernize its infrastructure with government stimulus money.

802.11n ratification throws a wrench in the WLAN supply chain

Another factor in wireless LAN demand is on the horizon: ratification of the 802.11n standard by the IEEE, expected to be completed this month. As a result, conservative companies that were reluctant to invest in pre-standard technology will consider the move to 802.11n in the coming months. In fact, the market is already feeling this effect, and it could be contributing to the supply chain shortages.

"There has been unprecedented demand for 802.11n," said Chris Kozup, senior manager for mobility solutions at Cisco Systems. "We have worked across our supply chain, knowing that the ratification is going to happen … to make sure we can meet any demand we expect to see from the market. It's fair to say, with the strength in demand we're seeing for these technologies, that that has played into the supply chain issue."

Small WLAN vendors could be hit hardest

If additional supply chain problems crop up, it could spell trouble for some of the smaller vendors, which may run into cash flow problems.

"It depends on how long the [shortage] persists," Dell'Oro said. "If you're delayed for three weeks, it's no big deal. Whereas if you're delayed for six months, that might be something different. It might start causing problems with cash flow."

The supply chain shortage isn't necessarily a disaster for enterprise network managers, but those who are waiting until the last minute to order wireless LAN infrastructure might find themselves in a pinch.

"We're not looking at six month lead times," said Craig Mathias, principal of Farpoint Group. "There are potential impacts. If you need it today, there might be a problem. But if an enterprise is planning properly, they should be OK."

Let us know what you think about the story; email: Shamus McGillicuddy, News Editor

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