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Electronic Components

US import tariffs on some Chinese components lifted

US import tariffs

US import tariffs on some Chinese components lifted

Tariff exclusions introduced on a range of imported goods have been reinstated, easing trade and supply chain relations between China and the US.

The import tariffs, originally put in place in 2018 and 2019, were between 7.5% and 25% for the affected products. The reinstatement of exclusions became retroactively effective from October 2021 and covers approximately $370 billion worth of Chinese imports.

The previous administration granted more than 2,000 exclusions to give relief to certain industries, but most expired before the end of 2020.

Several industries were seriously affected by the original tariffs, including the electronic component market. Parts like capacitors, resistors, transistors, PCBs and many more were hit with huge tariffs, which affected the price of end products and even stopped manufacturing in some sectors.

Areas affected

Aside from components falling victim to high tariffs, medical equipment and PCBs featured in X-ray machinery were also impacted. As many of the tariffs were introduced during the pandemic there was already a heightened demand, and the US had to find products in other places, probably also facing higher costs.

PCBs and graphics cards for use in computers ended up being slapped with a hefty tariff too. The computer sector was one that experienced huge sales during the pandemic, which was one of the factors that contributed to the semiconductor shortage.

Alongside the shortage of PCBs and components, there ended up being additional backlog with tariffs being placed on other consumer electronics like phones, laptops and smartwatches.

What next?

The tariffs affecting electronic components, although high to manufacturers, were likely not as impactful for their customers. Even so, there’s a chance there will be an increase in available components and for a cheaper price, which could result in a slightly lower price for consumers as well.

Products, like the x-ray machinery, that rely on entire imported PCBs may see a larger drop in price as manufacturers can once again access cheaper circuitry.

Computer parts like the GPU might continue to be sold at an increased price, both to make up for the astronomical cost they were originally bought for, and because of continued demand. Not only are graphics cards being used for gaming computers and general use but have also had attention from the crypto and data mining market.

Material costs were already raised by the pandemic, but chances are they will remain high for a while despite the tariff exclusions brought in. Manufacturers will probably try to make up for lost time and money by keeping the costs of products high. Especially for parts such as graphics cards, this might continue for quite a while.

Thankfully, Lantek is a supplier who values its customers above all else, and will always find you the best price for your parts. So don’t delay, get in touch today for all your electronics needs. Email us at sales@lantekcorp.com.

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component shortage

Chip Shortage causing car manufacturers to cut production levels

Chip Shortage

Chip shortage causing car manufacturers to cut production levels

A week doesn’t pass without an announcement from a car manufacturer that they are cutting production levels. Idling shifts and even entire factories has become normal for an industry that thrives on maximising output. 

Volkswagen, Ford, General Motors, Hyundai and Toyota have cut production levels to prioritise their most lucrative models. In some cases, plants have shut down for weeks at a time to allow supply chains to catch up to one another.

To understand how big this is, a 1-2 week plant shutdown will cost a car manufacturer millions of pounds at the very least. No manufacturer would willingly do this, but the global chip shortage is forcing them to.

Chip shortage in numbers

Just 53,438 cars rolled off assembly lines in the UK in July 2021, making it the lowest output in the month of July since 1956.

In June 2021, data from the Society of Motor Manufacturers and Traders (SMMT) showed that car production was down 52.6% on the same month in 2019. Telling us that we’re a long way off reaching pre-pandemic levels.

According to research firm AlixPartners. The chip shortage will collectively cost the auto industry $110 billion in revenue in 2021. A revised figure and an increase of 81.5% over the same firm’s figures in late January.

More telling figures come from Fitch Ratings, who estimate the chip shortage will cost automakers 5% of production. North America and Europe will be the hardest hit, with Asia and China coming in third and fourth respectively.

What’s happening with chips!?

The automotive sector has been hit harder than any other by the chip shortage due to cancelling orders for chips at the start of the pandemic.

Anticipating a slowdown that would last months, most car markers cancelled orders for chips. Semiconductor manufacturers filled order books with orders from companies making smartphones, laptops and other devices.

When the automotive sector bounced back sooner than expected, semiconductor manufacturers had hardly any capacity to meet demand. This has led to the situation today, where car makers can’t secure the inventory they need. 

Now, there are not enough chips, foundries are running at 99% capacity and new foundries take years and billions in investment to set up.

Changing the production line for a chip costs tens of millions and takes months, labour shortages are causing a manpower crisis, and the pandemic is causing short-term factory shutdowns at foundries and fabless plants.

When will the global chip shortage end?

It will take at least five years for the global chip shortage to subside. Assuming investment in new foundries begins in 2021/22. New factories are the only the way out of the shortage because demand for chips is only going to increase.

Opinions on when the shortage will end vary from early 2023 to 2025. The last 18 months has tested supply chains and wreaked havoc on production, but the automotive industry is experienced enough to cope with future problems.

When you need to source hard to find electronic components quickly because of allocation, long lead times, obsolescence or quality issues, contact Lantek Corporation for a fast response to your enquiries and reliable on-time delivery. Our Team are here to help.