Two things are fairly certain about the current electronic component shortage: It’ll end, and it’ll someday return.
At the moment, expectations are that this electronics manufacturing supply chain snag will smooth out for most components by late 2019 or early 2020. The timeline has kept true to the predictions on supply and demand since May 2018.
There is still concern with certain components, especially MCUs and MLCCs, that conditions won’t untangle until 2021. These trouble components are spread across various technological sectors including but not limited to:
Automotive -- the amount of electronic content in new cars has grown by more than 10% per year in recent years
No matter the industry, the sheer volume of variables involved makes it pretty much inevitable that shortages will return someday before you retire. If your company struggled in the past 4 years -- especially if you struggled with end of life electronic components -- keep reading. We’ll cover what sparked the current shortage, and how you can stabilize your electronics manufacturing supply chain.
How We Got Here: The Great Electronic Component Shortage
Who’s to blame for the electronics component shortage? The trouble that started in 2015 has been driven by, among other factors, consolidation of component makers and rapidly increasing component demand as the Internet of Things (IoT) became a major market force:
The auto industry went all-in on electronics.
Cellphones proliferated, with new models demanding smaller components coming out frequently.
All this activity led to worries about running out of components, so OEMs overbought. This was especially true of electronics companies that didn’t have the means to redesign their product in the next 2-3 years. If they didn’t scoop up every last-time buy possible, they’d be in huge trouble.
Meanwhile, some brokers picked up components that were going out of production and started selling them at inflated prices. There are good brokers out there, but there are a lot who do this in unscrupulous ways, and you even have to worry about receiving counterfeit components.
With technological advancements happening at an accelerated rate, the need for better-faster-cheaper is at an all-time high. Many component manufacturers no longer have the old technologies or reasonable resources to sustain an obsolete market. This compounded issues with an already-limited market and allocated product lines.
Even if the cycle comes around to “normal” again, that doesn’t mean it won’t be turned upside down again or be any more predictable.
Handling the Next Component Shortage
Well into 2019, electronic component supply and demand are coming into (at best) a tenuous balance. As such, price increases are slowly but surely going away.
But it’s hard to predict what the next “big thing” (like cellphones and automobile electronics were several years ago) will be.
Recognizing the uncertainty inherent in their business, some electronics contract manufacturers (ECMs) are looking further ahead in their supply forecasting. OEMs should take advantage of this. After all, an ECM’s ability to look out for your interests why you decided to contract out services in the first place.
As an OEM, you can try to keep up with the forces affecting component availability and adjust accordingly, or you can find a front-line partner who can keep you ahead of the madness.
What to Look for in Your ECM
Here are some important things to know about your ECM if you want to avoid being slammed by the next shortage:
Is your ECM financially stable enough to handle holding inventory and support your business?
Does your ECM seek long-term supplier commitments so it can be sure your parts are available 12 to 18 months out?
Can your ECM help re-engineer your product or find alternative components using SiliconExpert or another electronic component obsolescence database?
If you’re a smaller company, can your ECM help you juggle existing and new products through component forecasting or finding alternative components?
Keeping the electronics manufacturing supply chain free of blockages caused by component shortages is no small task. It requires diligence and ongoing attention to detail in the marketplace. The best way to stay in touch with changes is a long-term connection with an ECM that’s constantly checking the pulse of that market.
The worst of this shortage is probably over, but it doesn’t hurt to prepare for the next!