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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.

Categories
Electronic Components Environment

How does recycling electronics help create sustainability within the industry?

Thanks to advancements in material science and recycling technologies, it’s possible to recycle around 80% of most new electronics. For example, the smartphone in your hand or pocket has around 80% recyclable components.

The most valuable components in electronics are rare and precious metals. The quantity of these metals in your phone is tiny but the number of phones (and other electronics) that enter landfill is huge. This creates a lucrative opportunity for recyclers to invest in processes that can extract the most valuable components efficiently.

Recycling in the electronics industry

Recycling electronics is important to not only reduce e-waste, but also our dependency on the mining and manufacturing of new materials. 

The electronics industry is at odds with environmentalists because the industry that’s pioneering solar and renewable energy technologies generates a lot of e-waste. You can’t have it both ways. If you want technology to fight climate change, it first has to advance to a point where it becomes neutral and self-sustained.

Mass recycling is the process that will enable this in the future. For now, it is a stop-gap to minimise the electronics industry’s impact on the environment. And it’s working, with 15% of e-waste recycled globally in 2019. This figure is rising by 2-3% per year. In 2030 we expect the global e-waste recycling rate to hit 50%.

European legislation requires every manufacturer and producer to arrange and finance the collection, treatment, recycling and disposal of WEEE (Waste Electrical and Electronic Equipment). This is a positive step. In the future, we want to see 100% recycling efficiency, although this will require different materials to those used today.

Excess inventory management

Another area of the electronics industry where recycling is important is excess electronic components. These components are not assigned for manufacturing and have no purpose in production. They take up space and are depreciating assets.

These components tend to be discarded and written off. However, recycling is not the best thing for them. The best thing for them is putting them back into production. The old phrase “One man’s trash is another man’s treasure” springs to mind.

This process is known as excess inventory management and it requires an electronic component distributor to purchase unwanted stockpiles of components. These stockpiles are then re-sold through a distribution network.

This provides a few benefits to the seller:

  • An instant, positive cash injection
  • Reduced stockholding costs
  • Reduced time spent managing surplus stock

For example, our excess inventory specialists purchase and manage stock that has been identified for disposition. This process turns unwanted electronic components into cash and introduces new revenue streams into existing businesses.

Where does excess inventory end up?

Most excess inventory ends up on the production line with manufacturers and OEMs to create new products. This puts the components into production and significantly increases the time from manufacture to end of life.

Other components can find no end user. In this case, the components are sent to specialist recycling centres who purchase the components as scrap. Around 10% of excess inventory is sent on for recycling. The majority enters production.