The chip shortage shows no sign of letting up, and while we may be looking forward to innovation in chip design and better software as a result of the shortage, companies also have to deal with the here and now. So I spoke with Minim, a software company that last year merged with a modem-maker to find out how it was tackling the problem.
Minim is a software company formed in 2017 that ended up merging with publicly traded Zoom Telephonics last December. Zoom makes hardware that’s sold to enterprises and ISPs, and the combined company now sells modems under the Motorola brand and makes software to sell to ISPs to secure Wi-Fi networks for homes and businesses. Thus, after the merger, executives from Minim had to suddenly deal with hardware supply chains.
And in 2021, in the midst of a global semiconductor shortage, dealing with hardware supply chains means you’ve got to expend a lot of resources scouting for silicon. How bad has the situation gotten for Minim? Just this week, the company’s CEO said on its earnings call that it would start buying chips directly if necessary.
Typically, when a company sells hardware, it will design that hardware and work with contract manufacturers such as Jabil or Foxconn to build it. Those contract manufacturers usually handle the procurement of silicon. But given the trifecta of COVID-19, a Chinese trade war, and ramped-up demand for silicon, finding chips is a challenge right now.
Which is why, according to Minim COO John Lauten, the company has shifted its strategy from simply relying on its existing suppliers to negotiating with brokers and, if needed, buying silicon itself. “I don’t know how bad it’s going to get,” he told me. “We’re already seeing price gouging. There are some reasonable increases of 5%-10% and then there are others doing across-the-board price gouging.”
Outside of facilitating the buying of Minim’s own chips, Lauten has taken several steps that other companies could probably learn from.
Like others, he has committed to buying a year’s worth of chips in advance to ensure the company’s supply. But he has also revamped Minim’s operations to address the shortage. He’s set up a team consisting of engineering, finance, sales, and marketing to analyze the situation, producing heat maps that anticipate and track demand for chips. This team tracks forecasted production vs. procurement quantities by month and looks a year out to try and identify any forthcoming shortfalls.
Each week, the team reports directly to the Minim CEO. Lauten has also tasked the R&D team at Minim with looking for alternative silicon for every physical product the company makes. The R&D team has already identified two models where a part could be replaced with an easier-to-find chip.
At Minim, the shortage became noticeable in October 2020, and Lauten, who has experience at Scientific Atlanta and Nortel Networks, acted quickly to secure a long-term supply and communicate with everyone involved in the business so the company could keep producing hardware for its customers. As a maker of gear for ISPs, Lauten is struggling to keep DOCSIS 3.1 chips (DOCSIS 3.1 is the current cable modem standard) and Wi-Fi 6 chips in stock.
For Minim, which is in the midst of transforming from a hardware business into a software business, the chip shortage has added a new wrinkle. But by taking a proactive approach, it can show other companies how actively they should be managing the situation.