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Component Shortage Electronic Components

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 modernisation, 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 have 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 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 limited 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 UK Government’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 on 01904 415 415 for a chat.

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Active Components Component Shortage

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 on 01904 415 415 for a chat with our team.

Categories
Component Shortage Electronic Components

The Global Chip Shortage Has Created a New Problem: Counterfeits

The global chip shortage is officially wreaking havoc.

The world’s biggest carmakers, including Toyota and Volkswagen, have had to slow down vehicle production, and Samsung – who make their own chips – has had to delay the launch of several smartphones due to be released in 2021.

These are but a few examples of thousands of cases where the global chip shortage is wreaking havoc with manufacturers.

But that’s not all – the global chip shortage is creating a new problem: counterfeit components.

The issue is simple: chip manufacturers can’t make enough chips which has given counterfeiters a golden opportunity to plug the gap.

A counterfeit part is an unauthorised copy, imitation, substitute, or modification of an original component.

Counterfeit components are illegal and should not be used under any circumstances, but counterfeiters don’t care. They defraud you and hope you don’t notice. And if you do, there is virtually no chance of getting your money back. 

With no accountability, counterfeiters are having a field day.

A sophisticated criminal enterprise

The counterfeit electronic components industry is a multi-million pound industry. It has become sophisticated and impossible to shut down.

Criminals are taking advantage of weakened supply chains, inadequate quality control processes and inadequate reporting to flood the market with illegal components. They are praying on weaknesses and desperation to profit.

Counterfeit chips can look like the real thing, but worse still is they can also perform similarly during basic benchmarks and tests. This allows the most sophisticated components to penetrate manufacturing lines.

The risks of using counterfeit components include:

  • Financial loss
  • Reputational damage
  • Loss of customers
  • Refunds and regulatory fines
  • Bribery from criminals
  • Poor and dangerous product performance

How we can help you avoid counterfeits

We provide industry-leading chip testing to catch counterfeit goods. We have ISO 9001:2015 certification and ESD qualified staff. We have several anti-counterfeiting technologies available including a SENTRY machine, die testing and decapsulation testing.

We specialise in the procurement and delivery of electronic components for a wide variety of industries from the world’s leading manufacturers.

If you work with us as your electronic components distributor, you can avoid the issue of counterfeit chips and components for good. We have standard anti-counterfeiting policies and all the components we supply have a guarantee.

If you are still exploring your options, here’s some general advice:

  • If it is too good to be true, it probably is
  • Make sure any guarantee is worth the paper it is printed on
  • Look for ISO 9001:2015 certification
  • Demand testing prior to all deliveries
  • Only work with suppliers who have an anti-counterfeiting policy
  • Beware of spoof companies that pretend to be someone they are not
  • Consider staff training to identify when something isn’t right with suppliers

If you are concerned about counterfeit components in your supply chain we are happy to provide advice. Call us on 01904 415 415 for a chat with our experts. The chip shortage does not have to affect your supply chain with our help.  

Categories
Electronic Components

Semiconductor Production Capacity Expected To Hit Records Highs in 2021

As you probably know, we are in the middle of a global semiconductor shortage. Auto manufacturers are cutting jobs, brands are delaying the release of new products, and people are struggling to buy things like games consoles.

It’s a grim situation predicted to last a few years, but behind the scenes, semiconductor companies are preparing to come out of the chip shortage swinging.

In fact, it’s predicted that semiconductor production capacity will reach a record high in 2021 so long as additional production lines are completed. This is reliant on production lines coming online following investments made at the beginning of 2018.

According to industry forecasts, next year, another 10 production lines for 300mm silicon wafers will be added worldwide. These will contribute millions of semiconductors each year, helping to release some pressure on demand.  

IC Insights also provides the following forecasts for chips: “By 2024, the average annual growth rate of semiconductor production capacity will be 5.9%. Compared with the average annual increase rate (5.1%) of semiconductor production capacity in the past 5 years (2014 ~ 2019), the growth rate slightly increased.”

Record demand for chips

The semiconductor market is experiencing record demand across all sectors. Chip manufacturers are struggling to keep up, but they are investing in new production lines to meet predicted demand several years from now.

The latest report from IC Insights’ McClean Report says that the semiconductor market will shake off the Covid-19 pandemic with 13% growth in 2021.

Semiconductor unit shipments are expected to hit 1,135.3 billion in 2021, fuelled by chips that target connected devices, VR and AR, network and cloud computing systems, contactless payment systems, automotive electronics including autonomous systems and consumer electronics including smartphones.

As technology advances and the world becomes more digital and more connected, chip demand will increase ten-fold over the next few years.

Semiconductor manufacturers are struggling to keep up with demand now but there are signs of life as the IC Insights’ report demonstrates.

The world’s biggest chip companies, including TSMC, UMC, SMIC, Samsung, Micron and SK Hynix are going to play a leading role in how technologies roll out long into the future. There should be no doubt these companies will power our future.

What next for semiconductors?

The prices of semiconductors are expected to increase by 20% in 2021 due to a shortage in production capacity and higher silicon prices.

However, the future may not be silicon at all. Graphene chips are 100 times smaller than silicon chips and thousands of times faster. This technology is in its infancy but it’s showing great promise. We expect big things in the next decade.

We also expect the semiconductor shortage to persist until 2022. Shortages should lift beyond this as production capacity increases from new production lines. Chip makers will need to manage supply and demand better in the future. The current shortage is bad news for everyone. Thankfully, it won’t last forever. Of this we’re certain.

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