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Component Shortage Electronic Components Future Semiconductor Supply Chain Technology

Procurement executives concerned about digital innovation

Manufacturers are using digital advancements to battle current supply chain disruptions.

Almost all (97%) of those surveyed said they had significant disruptions in their direct materials supply chain.

67% said they were not confident that the technology can cope with the current or near-future challenges.

The most significant technology disadvantages seem to come with lack of visibility into supplier, ‘disjointed’ source-to-pay process with multiple systems, and a lack of spend reporting.

Even more (87%) said modernising the manufacturing procurement and supply chain takes precedence, and it is their biggest challenge yet. A further 92% said avoiding disruptions to their supply chain is their main goal for this year.

Among the main concerns for modernising the supply chain are potential disruptions during implementation, skills shortages, and scale and challenge of change management.

Around half of those surveyed (44%) predicted that the supply chain crisis would begin to calm by 2023. Significantly less (18%) thought it would reduce by the end of this year.

The study surveyed 233 senior procurement executives from US and UK manufacturing companies. It was commissioned by Ivalua, a spend management cloud provider.

See the original press release from Ivalua here.

While Covid-19 was seen as a factor in the supply chain instability, it was not the only culprit. Global supply chains had already been in a vulnerable position, partly due to factors like too much outsourcing and an overreliance on ‘just-in-time’ supply management.

What some are calling ‘outdated technologies’ are slowly being replaced in Industry 4.0. However, the implementation of tech like IoT, AI, machine learning and cloud computing is not a quick process.

The issue may be that this transition period would only further add to the current shortages rather than solving them in the short-term. Most companies are being deterred by this potential loss, and have been avoiding the change for as long as possible.

Whenever digital innovation comes, it will be a gradual and time-consuming process, but businesses will be better off for it.

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Component Shortage Electric Vehicles Electronic Components Semiconductor Supply Chain Technology

Chip shortage impact on electric car sales

Many renowned car companies have, by this point, tested the waters of the electric vehicle (EV) market. However, thanks to the roaring success of electric car sales last year, and governmental and environmental incentives, the EV market is about to shift up a gear.

Global shortage

The vehicle market was not able to avoid the semiconductor shortage that has been prolific for the past few years. Safety features, connectivity and a car’s onboard touchscreen all require chips to function.

This, combined with the work-from-home evolution kick-started by the pandemic, meant that car sales decreased, and manufacturers slowed down production. New car sales were down 15% year-on-year in 2020, and the chips freed up by this ended up being redirected to other profiting sectors.

Even without the demand from the automotive industry, it has not been plain sailing for chipmakers, who not only had to contend with factory closures due to COVID-19, but also several natural disasters and factory fires, and a heightened demand from other sectors. Needless to say, the industry is still catching up two years later.

The automaker market

Despite new car sales having an overall decline in 2020, EV sales had about 40% growth, and in 2021 there were 6.6 million electric cars sold. This was more than triple of their market share from two years previously, going from 2.5% of all car sales in 2019 to 9% last year.

Part of the reason why EV sales were able to continue was due to the use of power electronics in the vehicles. While there is a dramatic shortage of semiconductors and microelectronics (MCUs), the shortage has not affected the power electronics market to the same extent. That is not to say that an EV doesn’t need chips. On the contrary, a single car needs around 2,000 of them.

It begs the question, how many EVs could have been sold if there weren’t any manufacturing constraints. Larger companies with more buying power would have been able to continue business, albeit at an elevated cost, while smaller companies may have been unable to sustain production.

Bestsellers

The growth of the EV business in China is far ahead of any other region, with more EVs being sold there in 2021 than in the entire world in 2020. The US also had a huge increase in sales in 2021, doubling their market share to 4.5% and selling more than 500,000 EVs.

In Europe last year 17% of car sales in 2021 were electric with Norway, Sweden, the Netherlands and Germany being the top customers. Between them, China, the US and Europe account for 90% of EV sales

Predictions and incentives

Several governments have set targets to incentivise the purchase of electric cars, and to cut down on CO² emissions caused by traditional combustion engines. Many of these authorities have given themselves ambitiously little time to achieve this, too.

Biden announced last year that the US would be aiming for half of all car sales to be electric by 2030, and half a million new EV charging points would be installed alongside this. The EU commission was similarly bold, proposing that the CO² emission standard for new cars should be zero by 2035, a 55% drop from the levels in 2021.

Companies are also setting EV targets and investing in new electronic models. Some manufacturers are setting targets as high as 50% of their production being electric within the next decade, while others have allotted $35 billion in investment in their pursuit of EV sales.

Possible pitfalls

Aside from the obvious issues there have been with semiconductor production and sourcing, there are also other factors that may make the future of EVs uncertain. One of the essential components of an electric car is its battery, and the materials that are used are increasing in price.

Lithium, used in the production of lithium-ion EV batteries, appears to be in short supply, while nickel, graphite and cobalt prices are also creeping up. However, research is underway for potential replacements for these, which may help for both supply times and the associated costs.

The shortages are affecting everyone, but thankfully Cyclops is here to take some pressure off. No matter what electronic components you are looking for, the team at Cyclops are ready to help. Contact us today at sales@cyclops-electronics.com. Alternatively, you can use the rapid enquiry form on our website.

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Component Shortage Electronic Components Future Semiconductor Supply Chain Technology

Ukraine – Russia conflict may increase global electronics shortage

Due to conflict between Russia and Ukraine, both of whom produce essential products for chip fabrication, the electronic component shortage across the globe may worsen.

Ukraine produces approximately half of the global supply of neon gas, which is used in the photolithography process of chip production. Russia is responsible for about 44% of all palladium, which is implemented in the chip plating process.

The two leading Ukrainian suppliers of neon, Ingas and Cryoin, have stopped production in Moscow and said they would be unable to fill orders until the fighting had stopped.

Ingas has customers in Taiwan, Korea, the US and Germany. The headquarters of the company are based in Mariupol, which has been a conflict zone since late February. According to Reuters the marketing officer for Ingas was unable to contact them due to lack of internet or phone connection in the city.

Cryoin said it had been shut since February 24th to keep its staff safe, and would be unable to fulfil March orders. The company said it would only be able to stay afloat for three months if the plant stayed closed, and would be even less likely to survive financially if any equipment or facilities were damaged.

Many manufacturers fear that neon gas, a by-product of Russian steel manufacturing, will see a price spike in the coming months. In 2014 during the annexing of Crimea, the price of neon rose by 600%.

Larger chip fabricators will no doubt see smaller losses due to their stockpiling and buying power, while smaller companies are more likely to suffer as a result of the material shortage.

It is further predicted that shipping costs will rise due to an increase in closed borders and sanctions, and there will be a rise in crude oil and auto fuel prices.

The losses could be mitigated in part by providing alternatives for neon and palladium, some of which can be produced by the UK or the USA. Gases with a chlorine or fluoride base could be used in place of neon, while palladium can be sourced from some countries in the west.

Neon could also be supplied by China, but the shortages mean that the prices are rising quickly and could be inaccessible to many smaller manufacturers.

Neon consumption worldwide for chip production was around 540 metric tons last year, and if companies began neon production now it would take between nine months and two years to reach steady levels.

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Component Shortage COVID-19 Electronic Components Hard to Find Components Semiconductor Supply Chain Technology

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 Cyclops Electronics today at sales@cyclops-electronics.com. Or submit a rapid enquiry through our website.

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Component Shortage Electronic Components Future Semiconductor Supply Chain Technology

The European Chips Act and its impact on electronic component sales

Semiconductors are vital for our day-to-day life. They are in all the electronics you own but are also in your kitchen appliances, your car, your electric shower and many more. But what if we lost access to these components?

The huge reliance on imported semiconductors was made abundantly clear last year. Europe’s current share of the global semiconductor market is only about 10%, and the continents is otherwise dependent on supply from abroad.

The need for independence and autonomy in the European chip market has been made very apparent due to factors like Brexit and COVID-19.

The European Chips Act was first mentioned in the EU’s 2021 State of Union Letter of Intent, calling the act a key initiative for 2022. The EU created the Industrial Alliance for Processors and Semiconductor Technologies alongside it, to plan and oversee progress on the act.

One of the aims of the alliance is to increase Europe’s share in global chip production to 20% by 2030, but they will first have to identify issues with the market and map out a way to improve design and production.

During the ‘State of the World’ Special Address by European Commission president Ursula von der Leyen on January 20, the chips act was mentioned once again, and they announced draft legislation for the chips act is due in February of this year.

The European Commission president said that there would be five steps taken to improve the chip sector, and that they would focus on research first, then design and manufacturing. After these there would be an adaptation of state aid rules to increase provisions in case of shortage.  Lastly, she said the EU would work to support smaller, innovative technology companies.

In 2020 the United States accounted for the largest share in the semiconductor industry, with 47%. Following the US was South Korea with 20% of the market. China’s share has also increased quickly in recent years, putting it narrowly behind Korea. Despite Japan previously having a larger share in the market, they are currently on equal footing with Europe with a share of around 10%.

Despite no longer being a member of the EU, and therefore not directly signing the Chips Act, the UK could also have the potential to increase its standing in the global semiconductor race.

According to some UK-based chipmakers, the country has an advantage in the area of research and development. If research facilities like the University of Manchester were given the right attention and funding, they could develop sustainable resources like graphene to replace mined silicon in processors.

The UK electronics sector will always be considerably smaller than huge countries like China and America, but with significant investment they would have the ability to make a difference in the current chip shortage. And Cyclops is a perfect example of a smaller company making a big difference.

Cyclops is an electronic component distributor with a wealth of contacts from all over the world. With unrivalled stock and suppliers, Cyclops will put you ahead of your competitors. Contact us today at sales@cyclops-electronics.com.

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Component Shortage COVID-19 Electronic Components Future Semiconductor Supply Chain Technology

Latest electronic component factory openings

We’ve all heard about the shortages in standard components like semiconductors and chips. Cars, phones and computers, items we use every day, are no longer being produced at the speedy rate we’ve come to expect. The cause of this shortage is, in part, due to the COVID-19 pandemic.

This is especially noticeable in Europe and America, where production has often been outsourced to Asia in the past.

So who are the latest companies expanding operations, and how much are they spending? Check out our quick run-down of factories and when they should open:

Company: Intel

Location: Ohio, USA

Product: Chips

Completion date: 2025

Cost: $20 billion (£14.7 billion)

The latest, and possibly greatest, announcement on our list comes from Intel. The corporation revealed in January that they would be committing to building two chip manufacturing plants in New Albany, Ohio. The move is said to be due to supply chain issues with Intel’s manufacturers in Asia, and should boost the American industry with the creation of at least 3,000 jobs. Construction should begin this year.

Company: Samsung Electronics

Location: Texas, USA

Product: Semiconductors

Completion date: 2024

Cost: $17billion (£12.5billion)

The household name announced late last year that they would begin work on a new semiconductor-manufacturing plant in Taylor, Texas. The Korean company stated the project was Samsung’s largest single investment in America, and is due to be operational by the middle of 2024.

Company: Infineon

Location: Villach, Austria

Product: Chips

Completion date: 2021

Cost: 1.6 billion (£1.3 billion)

After being in construction since 2018, Infineon’s Austrian plant became operational in September last year. The chip factory for power electronics, also called energy-saving chips, on 300-millimeter tin wafers began shipping three months ahead of schedule in 2021, and its main customer base will be in the automotive industry.

Company: Northvolt

Location: Gdańsk, Poland

Product: Batteries

Completion date: 2022

Cost: $200 million (£148 million)

The Swedish battery manufacturer is expanding its operations with a new factory in Poland. While initial operations are supposed to begin this year producing 5 GWh of batteries, it hopes to further develop to produce 12 GWh in future. Northvolt has also just begun operations at its new battery factory in Skellefteå in Sweden.

Company: Vingroup

Location: Hà Tĩnh, Vietnam

Product: Batteries

Completion date: 2022

Cost: $174 million (£128 million)

The Vietnamese electric vehicle manufacturer is due to start production at its new factory later this year, where it will produce lithium batteries for its electric cars and buses. The factory will be designed to produce 10,000 battery packs per year initially, but in a second phase the manufacturer said it will upgrade to 1 million battery packs annually. VinFast, a member of Vingroup, is also planning on expanding operations to America and Germany.

Company: EMD Electronics

Location: Arizona, USA

Product: Gas and chemical delivery systems

Completion date: 2022

Cost: $28 million (£20.7 million)

The member of the multinational Merck Group is expanding operations with the construction of a new factory in Phoenix, Arizona, to manufacture equipment for its Delivery Systems & Services business. The factory is due to be operational by the end of the year, and will produce GASGUARD and CHEMGUARD systems for the company.

A bright future

These electronic component factory openings signal a great increase in business, and will aide in the easing of the component crisis. But it will take a while for these fabs to be operational.

Can’t wait? Cyclops is there for all your electronic component needs. We have 30 years of expertise, and can help you where other suppliers cannot. Whether it’s day-to-day or obsolete electronic components, contact us today at sales@cyclops-electronics.com, or use the rapid enquiry form on our website.

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Component Shortage Electronic Components Future Semiconductor Supply Chain Technology

Electronic component market to see continued growth by 2027

The electronic component market is set to see continued growth over the next five years, with projections estimating greater demand than ever.

Several forecasts have converged with the same conclusion; demand for components is set to rocket as the world adopts more advanced technologies. 

This article will explore the latest research papers and market analysis from reputable sources. We will also explore why the demand for electronic components is set to soar and the supply chain’s challenges. 

Global components market 

The market analysis covered by Market Watch predicts that the global electronic components market will reach USD 600.31 billion by 2027, from USD 400.51 billion in 2020, a compound annual growth rate of 4.7% from 2021. 

Active components market 

Another market report, this time looking at active electronic components, predicts the active electronic components market will reach USD 519 billion by 2027 (£380bn pounds, converted 12/01/22), a CAGR of 4.82% from 2021. 

Passive and interconnecting components market 

According to 360 Research Reports, the passive and interconnecting electronic components market is projected to reach USD 35.89 billion in 2027, up from USD 28.79 billion in 2020, a compound annual growth rate of 3.2% from 2021. 

Semiconductor wafer market 

According to Research and Markets, the global semiconductor wafer market is predicted to reach USD 22.03 billion by 2027, rising at a market growth of 4.6% CAGR during the forecast period starting from 2021. 

Dynamic Random Access Memory (DRAM) market

Market Reports World predicts the global DRAM market will see extreme growth, growing at a CAGR of 9.86% between 2021 and 2027. The market was valued at USD 636.53 million in 2021 and will grow to nearly USD 700 million by 2027.  

Why is component demand set to increase so much?

The world is undergoing an extreme technological transformation that began with the first computers. Today, electronics are everywhere, and they are becoming ever more intricate and complex, requiring more and more components. 

Several technologies are converging, including semi-autonomous and electric vehicles, automation and robotics, 5G and internet upgrades, consumer electronics, and smart home appliances like EV chargers and hubs. 

This is a global transformation, from your house to the edge of the earth. Electronic components are seeing unprecedented demand because smarter, more capable devices are required to power the future. 

What challenges does the supply chain face? 

The two biggest challenges are shortages and obsolescence. 

Shortages are already impacting supply chains, with shortages of semiconductors, memory, actives, passives, and interconnecting components. We are a global electronic component distributor specialising in hard to find and obsolete electronic components. Email your enquiries to us today at Sales@cyclops-electronics.com. Our specialised team is here to help.

As demand increases, supply will struggle to keep up. It will be the job of electronic components suppliers like Cyclops and electronic component manufacturers to keep supply chains moving while demanding increases. 

Obsolescence refers to electronic components becoming obsolete. While some electronic components have lifespans of decades, others are replaced within a few years, which puts pressure on the supply chain from top to bottom. 

In any case, the future is exciting, and the electronic components market will tick along as it always does. We’ll be here to keep oiling the machine.

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Component Shortage COVID-19 Electronic Components Semiconductor Supply Chain Technology

How Can Companies Combat the Electronic Components Shortage?

Electronic components shortages show no signs of abating, fuelled by growing demand for electronics, limited availability of raw materials, soaring manufacturing prices and lingering COVID-19 disruptions.

Shortages have hindered manufacturers since 2018, but things came to a head in 2020 with the COVID-19 pandemic disrupting supply chains.

The pandemic created an imbalance in supply chains, with demand for many components, from chips to actives and passives, outstripping supply. The question is, how can companies combat the electronic components shortage?

Partner with a distributor 

Electronic component distributors occupy a unique position in the supply chain, representing the manufacturer and customer. Distributors work for both parties to move components up and down the supply chain.

The benefit of working with a distributor is that your company will be in the mix for components not available through traditional channels.

For example, we specialise in the procurement and delivery of electronic components and parts for a wide variety of industries from the world’s leading manufacturers. We can help you beat allocation challenges and long lead times.

Diversify suppliers

Diversity is the key to strengthening your supply chain. You need multiple sources for electronic components. It’s a good idea to have retail and distribution channels, so you have several routes should one supplier channel fail.

Diversity can also be found in geography. A supplier in your home country is essential, but so are suppliers close to the manufacturing source.  

Expand storage capabilities 

If your company can expand its storage capabilities for essential components, this is the simplest way to combat shortages. By storing large quantities of components, you create a supply separate from the chain.

The risk with expanding storage is procuring more components than you need, resulting in oversupply problems that incur heavy losses.  

Source equivalent components  

When components are unavailable, you can specify equivalents that meet your performance and financial specifications. Equivalent components perform the same job as your original components, but another company makes them.

A simple example is Samsung, which uses its own Exynos chip or a QUALCOMM chip in the same smartphone model depending on where the smartphone is sold.

Visibility and proactive planning 

Supply chains are complex beasts that require visibility to manage. Monthly stock updates are no longer sufficient; to combat shortages, you need real-time supplier updates and an inventory catalogue to keep track of supply.

You can proactively plan component shipments and tap into price dips and new inventory when you have visibility over total supply.

Predict obsolescence

When electronic components become obsolete, manufacturers who haven’t planned for it scramble to find components that will work. This inevitably creates bottlenecks in the supply chain as many big companies compete for orders.

Obsolescence is predictable because all electronic components have a run date, and manufacturers update lifespans with inventory cataloguing. You can avoid shortages and soaring prices for rare parts by predicting obsolescence.  

Have shortages? Speak to us

We’re here to help you deal with electronic component shortages. Contact us here.

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Component Shortage COVID-19 Electronic Components Hard to Find Components Semiconductor Supply Chain Technology

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 have to 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 components distributor like us, increasing your inventory, and quickly moving to equivalent components when you experience shortages of active and passive components. Email us today with your component inquiries sales@cyclops-eletronics.com

Although global Covid measures are likely to extend electronic component shortages, there is no reason why they should stop you from doing business.

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Component Shortage Electronic Components Passive Components Semiconductor Technology

What is causing the surge in semiconductor and passive components?

As the world becomes smarter and more connected, the components used in electronic circuits are seeing a surge in demand.

Semiconductors and passive components (resistors, capacitors, inductors, transforms) are seeing a surge in demand as chip-heavy vehicles, consumer electronics and smart, Internet of Things devices are produced in larger quantities.

This demand is creating a shortage of semiconductors, integrated circuits and passive components. The situation today is that the factories that make certain components can’t make enough of them. This squeezes supply chains and ramps up the price, creating a high level of inflation passed down the supply chain.

The surge in semiconductor and passive component demand has reached an inflexion point. Demand has outstripped supply for many components, leading to car manufacturing lines shutting down and companies delaying product launches.

Tailwinds fuelling demand  

  • Smart vehicles
  • Consumer electronics
  • Military technology
  • Internet of Things
  • Data centres
  • 5G
  • Satellites
  • Artificial intelligence and robotics

At no other point in history has there been so many exciting technologies developing at the same time. However, while exciting, these technologies are putting strain on the electronic components supply chain.

Passives surge 

Passive components include resistors, capacitors, inductors, and transforms in various specifications. There are thousands of makes and unit models. They are essential to making electronic circuits. Without passives, there are no circuits!

Cars, electronics, satellites, 5G, data centres, Internet of Things, displays, and everything else powered by electricity, depends on passives. As devices get smarter, more components are needed, creating a cycle that will only go up.

Passives shortage 

Certain diodes, transistors and resistors are in shorter supply than in 2020. This is partly because of the coronavirus pandemic, which impacted manufacturing lines. Still, many manufacturers also shifted manufacturing investment to active components with a higher margin, creating a supply imbalance.

Even without these significant bottlenecks, the supply of passive components is downward while demand goes up. For example, a typical smartphone requires over 1,000 capacitors and cars require around 22,000 MLCCs alone. We’re talking billions of passive components in just two sectors.

Semiconductor surge 

Semiconductors (chips, in this case, not the materials) are integrated circuits produced on a piece of silicon. On the chip, transistors act as electrical switches that can turn a current on or off. So, semiconductors and passives are linked.

Chips are effectively the brains of every computing device. Demand for chips is increasing as circuits become more complex. While chips are getting smaller, manufacturing output is only slowly increasing, creating a supply shortage.

Semiconductor shortage 

The semiconductor shortage was years in the making, but things came to a head when the coronavirus pandemic hit.

At the start of the pandemic, vehicles sales dived. In response, manufacturers cancelled orders for semiconductors and other parts. Meanwhile, electronics sales exploded, filling the semiconductor order book left by the automotive sector. When vehicle manufacturing ramped up again, there weren’t enough chips to go around.

Manufacturing limitations are confounding the problem. It takes 3-4 years to open a semiconductor foundry or fabless plant, but investment in new plants in 2018 and 2019 was low. So, new plants are few and far between.

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