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component shortage

The global electronic component shortage – what happened?

The global electronic component shortage – what happened?
Abstract tech background made of printed circuit board. Depth of field effect and bokeh.

The global electronic component shortage – what happened?

Arguably the biggest ongoing crisis in the tech industry is the global semiconductor shortage. You can’t go far online without seeing news about it, and many people have seen it firsthand when trying to buy a brand-new car, or a recently released games console.

When did it start?

The obvious factor contributing to the shortage is COVID-19. The virus infected millions and sent the world into lockdown, which then led to the housebound masses logging in and going online.

At the start of lockdown in March 2020, 60% of 18-24-year-olds were increasing their use of home delivery instead of leaving the house. Amazon’s revenue also rose at a quicker pace than in previous years, with the company making $88.91 billion in Q2 2022.

Alongside the increase in online shopping came an increase in other digital activities like PC and console gaming. In the last quarter of 2020 desktop, notebook and workstation sales rose to a record 90.3 million units. Tech company Sony saw 25% of its revenue come from game and network services, and around 18% from electronics products and solutions.

In another case of bad timing, both Microsoft and Sony were about to release their next generation of game consoles, and Nintendo Switch sales were booming. All of this meant demand for components was skyrocketing.

This then led to delays in car manufacturing. Why? Because all the available chips were being bought up by computer and electronics manufacturers, so there were none left for the automotive industry. A car part may need between 500 and 1,500 chips, and are used for many parts including the dashboard display and to control the airbag.

There were other elements that contributed to the shortage before this: The US and China had been imposing increasingly high tariffs on each other for the past two years, and natural disasters and fires took out several factories in Japan, Taiwan and China.

When will it end?

The comeback from the semiconductor shortage will not be quick. Some factories that were shut down by natural disasters are still repairing the damage and trying to reopen production. But as the demand is staying high, there will need to be new facilities created to cater for the increase in demand.

The time, expertise and money needed to start a new factory will be too much for smaller firms to manage, so then the hole in the market needs to be filled by larger corporations like Intel and Samsung. Both companies currently have plans to open new fabs in America, but it will be a while before they can start production.

Intel’s ambitious plan to construct the one of the largest chip factories ever in Ohio would alleviate demand, but is not due to start production until 2025. Similarly, Samsung’s Texas fab will not be operational until 2024.

Despite smaller factories opening, the substantial backlog will not be solved by these alone. There will need to be a combination of an increase in production, time efficiency and, with the pandemic in mind, automation to decrease person-to-person contact. There will also need to be a stock of chips manufactured to avoid shortages in future.

Europe and America have both put an emphasis on increasing their domestic chip production in the next decade, in the hopes that this will prevent importing issues in the future.

The speed at which technology is currently being developed also puts manufacturers in a tight spot. Not only are more electronic devices being produced all the time, but the technology of the components within them is also advancing quickly.

While it is difficult to forecast entirely, experts say the shortage could last a few more years. Hopefully, with the opening of the larger plants estimated for approximately the same time, the chip shortage might be mitigated by 2025.

We can help

The market is currently just as competitive in the case of other electronic components, but Cyclops can help. With our extensive stock of day-to-day and obsolete components, we can supply you when others cannot.

For all your component needs, contact Lantek today at sales@lantekcorp.com. Or submit a rapid enquiry through our website.

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Electronic Components

What Shortage? How Electronic Component Distributors Make Supply Meet Demand

What shortage? How electronic component distributors make supply meet demand

When buyers can’t find electronic components, they turn to distributors like us who can source scarce and obsolete parts.

Our experience has been tested to new extremes over the last several months due to the semiconductor and wider electronic components shortage. This shortage was years in the making but has been amplified by COVID-19.

It says everything about the state of the electronic components supply chain when Samsung, who make their own chips, don’t have enough chips. Shortages have affected brands like Samsung, Apple, Volkswagen and Nintendo not just in terms of supply, but also prices, which have skyrocketed in 12 months.

When the chips are down, prices go up.

Distributors are busier than ever

Lantek Corporation, as well other distributors, have become more essential than ever in supply chains since the COVID-19 pandemic began.

It’s no exaggeration to say distributors like us are keeping many businesses going. We keep production lines going by sourcing scarce parts from around the world – parts that would be impossible to source without excellent connections.

We are seeing desperation from companies that have never experienced supply chain problems. We’re talking about global companies listed publicly.

The situation is so bad for some components that some companies are paying a 100% premium just to secure them. Supply and demand is driving fierce competition and bidding wars are not uncommon.

If these revelations shock you, consider this – the electronics components shortage isn’t expected to abate until late 2021 at least. By then, there should be more order to the chaos, but some industry experts expect it to persist longer.

For example, IBM has said the chip shortage could last 2 years.

A 2 year extension would extend the chip shortage to 2023 at least. This is likely to be the case for other components too, including memory, integrated circuits and display drivers. A huge number of companies will be affected.

Playing a crucial role in the supply chain

Distributors like us are able to source hard-to-procure components because we have rapport with the best suppliers in the industry. In other words, we have immense buying power, and we put this to use for our customers.

Another way we are playing a crucial role in the electronics components supply chain is the reduction of counterfeit components.

Counterfeiters are taking advantage of weakened supply chains, lapse quality control processes and inadequate reporting to flood the market with illegal components. This has affected thousands of buyers and will affect many more.

Our role in this is to deploy anti-counterfeiting technologies including a SENTRY machine, die testing and decapsulation testing to test the components we procure. This ensures the components we supply are genuine parts.

We provide industry-leading chip testing to catch counterfeit parts. We have ISO 9001:2015 certification and ESD qualified staff.

If you need to buy parts and the only way to get them is with a distributor, don’t rush in – make sure your distributor is as equally qualified as us first. If you need help, feel free to call us on 001 973-579-8100 to chat with our experts.

 

 

 

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component shortage Electronic Components

Perfect storm’ creates electronic component shortages

Perfect storm' creates electronic component shortages

A perfect storm has hit the electronic components market, creating supply chain problems that will be felt for several years.

The perfect storm

Even before the COVID-19 pandemic, most electronic component manufacturers were running at 95-98% capacity.

This high demand for electronic components was fuelled by growth in technologies like automation and the Internet of Things – technologies that are only in their infancy now but will mature in the next decade.

This high manufacturing output was felt across all types of components, especially chips (semiconductors, memory) and integrated circuits. It was even difficult to get a hold of some active and passive components in 2019.

Then, in 2020, the COVID-19 pandemic hit. Car manufacturers and other manufacturers affected by shutdowns paused orders for electronic components. Meanwhile, manufacturers benefitting from lockdowns scaled up.

Now, with the development and roll-out of COVID-19 vaccines, industries that shut down have opened up again. But there’s a problem – demand for electronics has not wavered and there isn’t enough manufacturing capacity to serve everyone.

Quite simply, there isn’t enough bread to go around.

Demand is ramping up

We are now in a situation where electronic components manufacturers are running at 99-100% capacity. Demand has soared for all types of components, from chips and memory to diodes and displays. This is squeezing most supply chains.

There are so many contributors to this squeeze. Emerging technologies like AI, automation, virtual reality, augmented reality and machine learning are fuelling demand for smarter chips and data centre modernization, while technologies like 5G and Wi-Fi 6 are demanding infrastructure rollout, which requires a significant effort.

When it comes to chips, however, cars are the biggest users. Cars can have as many as 22,000 multilayer ceramic capacitors (MLCCs) each. This will increase as cars get smarter (a self-driving taxi sounds great, but it’ll need around 30,000 chips).

Suppliers are slowly adapting

There has been years of under-investment in new foundries and plants. This under-investment has affected manufacturing capacity today.

To their credit, most manufacturers are looking to expand capacity by setting up new foundries or acquiring plants. Trouble is that most plants take years to set up. Some plants that started a build in 2017 are still being built.

Staffing is also an issue. The biggest challenge suppliers face is social distancing and COVID prevention policies, which have reduced staff numbers in many factories.

You can’t automate every process in a factory, so it is a given that having fewer staff will increase lead times. Some manufacturers have been harder hit than others with this, but all will experience staff shortages during the pandemic.

In addition to this, freight has become more challenging during the pandemic. Things are taking longer to move and there are fewer commercial flights. Global shipping rates have skyrocketed during the pandemic because of this. Higher shipping rates have contributed to price increases for most electronic components.

Weathering the storm

We predicted the electronics component shortage in early 2020 following the USA’s national lockdown. We knew supply chains would be squeezed and stretched due to changes in economic output and industry trends.

The best way to weather the storm is to work with us or another reputable electronic components distributor. We focus on delivering outstanding service, with industry leading quality and dependability. Call us at 001 973 579 8100 to chat.

 

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Electronic Components

Active Electronic Components Market Growing Demand

Active Electronic Components Market Growing Demand

Active electronic component demand is soaring. The market is expected to grow by a compound annual growth rate of 4.8% during 2021-2026, fuelled by new technologies and faster and more globally available internet connectivity.

What’s driving it?

An explosion of new products with AI and IoT support and tailwinds like 5G are fuelling demand for active components.

Semiconductor devices, optoelectronic devices and display technologies are significant applications. Examples include smart home appliances, virtual reality headsets, connected medical devices and electronic ordering systems.

Here’s a non-exhaustive list of active components in high demand:

  • Diodes
  • Transistors
  • Integrated circuits
  • Optoelectronics
  • Sensors
  • Digital and analogue circuits
  • Batteries and power supplies
  • Generators
  • Vacuum tubes
  • CRT / LCD / VFD / TFT / LED displays

The increasing trends of the Internet of Things (IoT), automation, artificial intelligence, machine learning and virtual/augmented reality are expected to fuel demand for active electronic components for years to come.

Challenges lie ahead

This growing demand is not without its challenges. How will manufacturers get a hold of active electronic components if there isn’t enough to go around? Will geopolitical tensions affect supply? How will COVID-19 play a role in the future?

COVID-19

COVID-19 can create supply chain and market disruption and have a financial impact on firms and financial markets. If the virus persists in causing global disruption, this is likely to cause a shortage of active components in the future.

Geopolitical tensions

The US and China’s trade war in 2020 affected chip supplies around the world. Geopolitical tensions remain a risk in the future. Who knows if certain brands will be banned? It’s important that manufacturers stay in the loop to avoid supply chain problems.

Manufacturing bottlenecks

The world is advancing at a rapid rate and electronics components manufacturers are struggling to keep up. While investment in new factories is ongoing, demand may exceed manufacturing capacity, causing a shortage of components.

Price increases

Inflation is making everything more expensive. Add wildly fluctuating exchange rates and increasing demand for active components and you have the perfect recipe for price increases. This could cause a bidding war.

Active components and the future

The future is filled with more technology than you can imagine. Everything will be connected, including your car to your smartphone and your TV speakers to your smart home assistant (e.g. Alexa). Anything electronic can have a chip these days and you can bet innovators will find a way to make everything smart and connected.

With the active electronic components market predicted to increase in value significantly over the next five years, it is essential that companies have a reliable way to source the active components they need.

This is not a matter of beating the competition but a matter of staying operational amid impending shortages. The current chip shortage is a prime example of what can happen if a perfect storm of industry issues occurs.

If you need to source active electronic components, we can help. Email us if you have any questions or call us at 001 973-579-8100 to chat with our team.

 

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component shortage Electronic Components Lead Time

Why We’re Facing a Global Semiconductor Shortage

semiconductor

Why We're Facing a Global Semiconductor Shortage

The world is experiencing a semiconductor shortage at a time when demand for semiconductors is at an all-time high. Manufacturers can’t make enough of them and we’re now seeing this affect the availability of products. You probably remember last year Sony released the PlayStation 5 and Microsoft released the Xbox Series X. AMD released the Big Navi GPU (RX 6000) and Apple released the iPhone 12 range. What all these products have in common is they were all directly affected by the semiconductor shortage. Demand well and truly exceeded supply.
What’s causing the shortage?
A perfect storm has hit the semiconductor market. It isn’t one thing but a combination of different things that’s causing the shortage today.
The COVID-19 pandemic
When the COVID-19 pandemic hit, car and commercial vehicle sales took a hit. Estimates suggest that sales fell by 50% or more within a single month. In response, car manufacturers scaled back orders for semiconductors and other parts. At the same time, demand for electronics chips soared as more people spent time working from home and on furlough. Laptops, smartphones, drones, smartwatches, tablets, kitchen appliances – everything has a semiconductor nowadays. Then you have IT, data centres, internet infrastructure and cloud and edge computing. All are powered by semiconductors. And so, the factories that were at capacity making semiconductors for cars switched to making semiconductors for electronics. This was a blessing in disguise for factories because semiconductors for electronics have a higher margin. However, it has caused a problem for car manufacturers who now need to ramp up production. The situation now is this – car sales are picking up and car manufacturers are fighting for orders against electronics manufacturers. Factories are at capacity and can’t make enough to go around. This is feeding through to nearly every sector. Ultimately, this is the result of poor planning from car makers who cut orders too deeply last year at the beginning of the COVID-19 pandemic.
Manufacturing limitations
Even before the COVID-19 pandemic hit, there weren’t enough factories to meet semiconductor demand. There were long lead times in 2019 because semiconductor demand outpaced the ability of factories to make them. This problem has persisted through to 2021 and has been compounded by the COVID-19 pandemic. With most factories running at 99-100% capacity, there is very little room for boosted output. You would think that the solution is to build more factories, but this would not solve the problem today or even a year from now because semiconductor fabs take at least a year to build with another 6-12 months in setup time. Semiconductor manufacturers are investing in new factories, expansion and more efficient technologies, but short-term solutions these are not. The US is attempting to bring semiconductor manufacturing to US soil to remedy this or at least reduce dependency on foreign suppliers.
US and China trade war
Calls for domestic manufacturing are heating up in the US and China, the result of a trade war brought about mostly by supply chain disruptions related to the COVID-19 pandemic. Reports in May 2020 that the Trump administration was in talks with Intel, TSMC, and Samsung about building US chip factories proved true. In 2021, with a new president and Biden administration, these talks are persisting. The reason a technology trade war broke out between the US and China is because the US imposed a 25 per cent tariff on $34 billion of Chinese imports in 2018. There has been bad blood ever since with threats and action on both sides. This eventually affected the semiconductor supply chain because in 2020 the US turned to export restrictions targeting the semiconductor supply chain to safeguard critical infrastructure in the telecommunications sector. This followed a 2019 ban on the Chinese company Huawei for “national security reasons”. For example, one of the consequences of export restrictions was that American firms were cut off from chips made by China’s Semiconductor Manufacturing International Corporation – the third largest chip maker in the world with 11% market share.
Local production problems
Factory shutdowns due to natural disasters, bad weather and the COVID-19 pandemic have caused semiconductor supply chain issues. Most of the world’s semiconductors are manufactured in Taiwan. Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, has a 28% market share. The second largest, UMC, also based in Taiwan, has a 13% market share. Taiwan is experiencing serious water droughts in 2021. Millions of tonnes of water are required to manufacture semiconductors every week. Taiwan Semiconductor Manufacturing is having to bring water in on trucks and UMC are doing the same. This has caused significant drops in manufacturing efficiency. The US is also experiencing shutdowns. NXP Semiconductors had to shut its plant in Austin, Texas, due to winter weather in February 2021. Factory shutdowns cause order backlogs and extended lead times. Orders persist and pile in whether a factory is down or not. This squeezes supply chains, causing a shortage.
How long will the semiconductor shortage persist?
We expect the semiconductor shortage to persist through 2021 but ease towards the end of the year as demand for electronics chips decreases as COVID-19 lockdowns end. This will cause a shift in supply from electronics semiconductors to automotive semiconductors which will provide the industry with a much-needed equilibrium. The world’s largest semiconductor manufacturers – TSMC, UMC, SMIC, Samsung, Intel, SK Hynix – are investing in increased output. Many investments were in the pipeline as early as 2019 and are expected to yield results at the end of 2021. Right now, there is a serious imbalance in the demand for semiconductors, one that our existing infrastructure is not built to cope with. This imbalance will ease over time.
How can supply chains continue to meet demand?
If you have been impacted by the semiconductor shortage you can meet demand by partnering with an electronics components distributor like us. We specialise in the procurement and delivery of semiconductors and parts for a wide variety of industries from the world’s leading manufacturers. You can find out more about what we do here.
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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?

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

Supply chain efficiency: Will there be another demand increase 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.

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Charity/Global Electronic Components

How the electronic supply chain has been divided by COVID-19

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

How the electronic supply chain has been divided by Covid-19

 

Amidst doom and gloom predictions of global economic fallout from COVID-19 and further human and social ramifications, the electronics industry is quietly confident that demand for products will not stall this year or shortly.

This makes for a morale-boosting headline, but underneath the battle lines, there is a trade war raging as a result of a divided supply chain.

Equipment manufacturers are struggling to get a hold of components and component manufacturers are struggling to make enough new components. This, the result of a virus that has thrown the world into unchartered territory and forced elected leaders into making profound decisions that have affected our way of life.

The electronics sector is healthy for now, but keeping it going has required change and intelligent thinking. This is how the electronic supply chain has been divided by COVID-19:

The battle for stock

With the production capacity for electronic components down as a result of COVID-19, it is no surprise that the components’ supply chain has been impacted. Fewer components are being made, creating a shortage of stock.

As a result of this, we are now seeing a shift in behavior from manufacturers, who are component hoarding and paying over-the-odds for stock to meet demand. This has reduced the number of components available on the open market, creating a shortage, and the issue is compounded by a lack of new production.

Supply moving away from China

As a result of the coronavirus in China, which has devastated the workforce and adversely impacted the country’s social reputation, manufacturers are beginning to seek alternatives to meet the demand for electronic components.

Taiwan, South Korea, Singapore, Malaysia, the United States, Japan, Vietnam, the Philippines, and Germany are all rich manufacturers of electronic components. We are now seeing greater diversification in supply chains. This is good news for the global economy, but not so much for China and Hong Kong.

Changes in supply chain planning

COVID-19 has forced manufacturers to pivot their supply chains to boost efficiency. From being more flexible with transportation to estimating capacity and accelerating production, manufacturers are doubling up on decision-making processes.

The optimization of production and distribution capacity are key areas, so that production can continue to meet demand while managing health. Available inventory has now become a more important factor than ever too – no longer can manufacturers rely on a steady supply of components. Orders must be planned.

Closer partnerships with electronic component distributors

Pre COVID, manufacturers typically kept the procurement of electronic components in-house with a slick and efficient operation. Inventory would be automatically updated with component orders placed electronically between supplier and manufacturer.

If COVID has taught manufacturers one thing, however, it is that you can never rely on one single supplier to deliver. One failure breaks the system.

This has led manufacturers to partner with component distributors who can deliver the stock they need. The sourcing of components is being increasingly outsourced, which brings some inefficiencies, but is necessary to keep things ticking over.