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component shortage Covid-19

Will continued global Covid measures extend electronic component shortages?

Continued global Covid measures will likely extend electronic component shortages, hindering manufacturers for several years.

The coronavirus pandemic has reshaped the global economy irreparably. Demand for electronic components has shifted, supply chains are broken, and new, more infectious variants threaten to bend normality further.  

It looks like the world is running out of electronic components, but there’s more to shortages than meets the eye.

The coronavirus pandemic is the biggest reason behind component shortages. With this single statement, we can deduce that shortages will subside when the pandemic subsides, freeing up supply chains through fewer restrictions.

However, we know the coronavirus isn’t going anywhere, and its persistence and ability to evolve means we must learn to live with it.

Add raw material shortages, soaring prices, low investment in new manufacturing facilities, and geopolitical issues related to supply and demand. Now we have a recipe for several years of component shortages.

How covid reshaped supply chains 

In May 2020, the first wave of the coronavirus pandemic hit most of the world. Countries locked down, and most sectors of the economy suffered.

Demand for some categories decreased, while demand for others increased. For instance, demand for vehicles evaporated while demand for home computers soared, creating an imbalance in the supply chain.

Estimates suggest that vehicle sales fell by 50% or more within a single month. In response, vehicle manufacturers scaled backorders for components.  

At the same time, demand for electronics chips and parts soared as more people spent time working from home.

When demand ramped back up for vehicles, there weren’t enough components to serve them and electronics. This is a story shared by multiple industries, with supply chains broken by supply and demand imbalances.

The matter wasn’t helped by local and national lockdowns, circuit breakers, new variants, and mitigating problems like floods and climate change.

There is no easy solution or fast fix 

The pandemic has also caused prices for common and rare earth metals to explode, increasing over 70% since the start of 2021 for some metals. These prices are made even worse by soaring inflation.

Trying to build supply chain resilience during the coronavirus pandemic is like trying to build a house of cards on a jittering floor. Just when you think you have it, something comes along that knocks it down, and you have to start over.  

The simple fact is that the world needs more factories to make components, and it needs to get a grip on inflation. The Covid pandemic is not going away, although the virus appears to be getting milder, which is a good sign for the future.

You can bolster your supply chain by working with an electronic component’s distributor like us, increasing your inventory, and quickly moving to equivalent components when you experience shortages of active and passive components.

Although global Covid measures are likely to extend electronic component shortages, there is no reason why they should stop you from doing business.

Contact Lantek today with all of your electronic component inquiries. Our team will go above and beyond to help you get the components you need.

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Covid-19 Electronic Components Supply Chain

Electronic component supply chain efficiency. Will we see another increase in supply and demand due to COVID-19 this year?

In 2020, the electronics components industry saw both increases and decreases in supply and demand depending on where you look.

For example, demand for semiconductors that enable servers, connectivity and cloud usage skyrocketed due to stay at home workforces. Meanwhile, demand for semiconductors used in the automotive industry declined as car sales fell.

In other words, the supply and demand for electronic components was different across various sectors. Now that 2020 is behind us, 2021 is looking to follow much the same path as we continue to contend with COVID-19.

However, there will be one big difference – most of the sectors that had reduced demand for components in 2020 will ramp up their purchase orders in 2021. This is the result of economies opening up and companies getting back to operations.

Supply and demand in 2021

We believe the electronic component industry will witness a significant increase in supply and demand in 2021. There are a few reasons for this. The first is that most industries hampered by the COVID-19 pandemic will open up. Car manufacturing is the big one. This will fuel a surge in demand for semiconductors and sensors.

2021 will also play host to cyclical sectors and several tailwinds. 5G, Wi-Fi 6, AI, robotics, cloud, communications, edge computing and AR / VR are the big ones. These technologies will fuel demand for new electronic components.

Supply constraints will persist

Factories will have to ramp up production to meet demand. 2019 was a bumper year for electronics and a lot of infrastructure was built to meet demand. 2020 stuck a fork in the road, placing higher demand on certain components. In 2021, demand will return to a form of previous normality, increasing supply constraints.

We expect supply constraints of components to grow in 2021. Manufacturers will struggle to get a hold of the parts they need.

This will increase the need for partnerships with electronic component distributors like us who are ingrained into the fabric of the industry.

Things will get better over time

With the global rollout of the coronavirus vaccine in place and manufacturing sectors protected from Government shutdowns in most countries, 2021 should be a year where we see supply constraints reduce over time.

Supply and demand will get back to 80% normality toward the end of 2021. 2022 should be much better. This assumes we get to grips with this horrible virus.

In the meantime, tailwinds will continue to fuel demand for electronic components in sectors like AI and edge computing. COVID-19 has only accelerated digital transformation in most sectors. This is a powerful tailwind.

Ultimately, the demand for passive and active components will increase in 2021. You can make sure you have access to the components you need by partnering with us. We specialise in the procurement and delivery of electronic components and parts for a wide variety of industries from the world’s leading manufacturers.