A market that has not stabilized for many years, a global pandemic, climate change and disasters: the issue of chip shortages is very complex. The current situation of the market for electronic components cannot be traced back to Covid-19 alone.
While an extraordinary winter storm paralyzes production in the American region, the Asian region must fight against fires, droughts, and earthquakes. And the global pandemic is causing a surge in demand for entertainment electronics, home office equipment, etc. An already strained market is working at the limit of capacity, and there are failures and bottlenecks in the supply chain that cannot simply be filled. With so many interrelationships, it's hard to keep track of things. Put simply, the influences on the market situation can be summarized in five points:
Free markets are characterized by many complex production stages. A single process can spread around the world in several stages. With the spread of the coronavirus, many countries have been blocked since the beginning of 2020. The consequences: production downtime, break-ins in supply chains and border closures that make it more difficult to supply electronic components.
At the same time, many areas of electronics such as entertainment electronics, home office equipment or medical technology are experiencing a boom due to the pandemic. Among other things, disrupted supply chains result in a significant excess of demand, and in many areas production capacities are reaching the limit.
At the same time, fires and droughts in Southeast Asia make semiconductor production more difficult.
Many productions in the Asian region are affected and must deal with breakdowns and downtime that sometimes drag on for months. Combined with capacity issues, this leads to a disruption of the global supply of chips and products to the world market.
The difference from the heat and wildfires in Southeast Asia could hardly be greater. Because at the beginning of 2021, American states like Florida or Texas are suffering from an extreme cold wave. Large chip manufacturers such as Infineon or NXP are forced to stop their production due to bad weather. Only after a month can production be resumed slowly, which for companies means a loss of millions in sales. The bankruptcies have hit a sector that is already working at the limit.
In the logistics sector, Covid measures clash with consumer behavior. Because while online commerce is experiencing a high momentum and transport fares between Asia and Europe have doubled since 2020, customs clearance in many ports is slowing down due to the measures.
Quarantine rules disrupt processes in air and truck transport. Regardless of Covid-19, the US trade war with China or incidents such as the blockade of the Suez Canal are causing further disruptions in supply chains.
The shortage of raw materials is not a local problem, nor is it limited to the market for electronic components. Everything ismissing: semiconductors, copper, resin, plastic, wood. The list goes on.
Starting in mid-2020, the corona crisis will show signs of a global economic recovery. Due to the massive demand that followed, there is a bottleneck effect for many raw materials. There are not enough raw materials to meet all needs, which in turn is slowing the economic recovery.
In the field of semiconductors, the market is very concentrated. Because 55% of the total market volume is placed on the market only by 10 manufacturers. On the customer side, the 10 largest customers together already cover more than 40% of demand.
If you look at the regional distribution of demand in 2020, the Asian market has a 60% share, North America 20%, and the EMEA and Japan economic area each have a share of about 10%. With large markets in Asia and North America, manufacturers and suppliers are consequently more interested in serving them. The European region is less at the centre of attention for the semiconductor industry.
At present, stocks of electronic components are largely reduced, the industry lives by the day. Because problems run through the entire procurement process, from the production of electronic components to transportation to customers.
Allocations are part of today's daily life; companies are assigned only partial quantities of their orders or even suppliers completely refuse orders. Delivery times are extremely long and the result is panic buying. Electronic components have delivery times of 20, 30, 50 or even up to 100 weeks. There is no planning security in the current situation.
Prices have already risen sharply and will continue to rise. This also affects orders that have already been confirmed, as prices at manufacturers fluctuate so strongly. In addition, brokers are often used that procure components at exorbitant prices in various ways. And it's not just the components themselves that become more expensive, logistics costs also increase significantly.
In summary: The entire electronics industry is facing acute and massive challenges in the supply chain. Because here price changes are no longer in the foreground, but in the first place deliveries.
Date : 19-10-2021
TCL (Europe) Elektronika Kft.
120-122 Rona Street,
1149 Budapest,
Hungary
+36-14-683970
sales@tclelektronika.com
TCL Elektronika can manufacture PCBs ranging from single-sided to complex boards in excess of 40x layers. Our in-house CAM engineering resource allows us to rapidly check, panelise and commercially optimise a fast turnaround prototype as well as small volumes.