Electronic component shortage: The Past, The Present, and The Future

If you are in the electronics industry, the shortage of electronic components is undoubtedly a hot topic and has had a profound impact since the pandemic began. This is due to the increased demand for certain products (e.g., laptops and game consoles) and the disruption of the supply chain due to factory closures in China. With the closure of production of many electronic components for smartphones and televisions and the increase in consumer demand shifting to new technologies such as 5G and artificial intelligence, the shortage of electronic components has become a major issue worldwide.

So what does the market look like now? This article explores what has happened, how to overcome the challenges, and what the future holds.

What was and still is the source of the scarcity?

The shortage of electronic components results from the global shortage of semiconductors. A confluence of factors, including the Covid 19 pandemic and U.S.-China trade tensions, led to the shortage in early 2020. The pandemic disrupted the global supply chain, while the trade war led to tariffs on Chinese goods, including semiconductors. Again, the pandemic played an essential role in the chip shortage. The pandemic forced people to work from home, and students had to stay home and take online courses. Consumers also stocked up on computers and other electronic devices, fearing that stores would not adequately supply them during the pandemic. Another important reason for the shortage is that cars are becoming more advanced these days, and there is also a lot of demand in the semiconductor sector.

As a result, the prices of semiconductor chips have skyrocketed, and there has been a widespread shortage of electronic components. The shortage increased prices for a wide range of consumer electronics, from laptops to smartphones.

Although the situation has gradually eased, the shortage continues, and it is unclear when it will end. The still ongoing war in Ukraine and the recession in some countries are exacerbating the situation by disrupting the supply of key raw materials.

Shortages of key electronic components?

The shortage of electronic components is a major problem, affecting many industries, such as computer hardware, consumer electronics, and telecommunications. A shortage of components can lead to a shortage of products, causing companies to suffer significant losses. Manufacturers have focused on improving their efficiency by reducing production costs and increasing product yields.

Let's see how your inventory compares to industry trends and themes:

The following industry trends echo the shortage:

1) By year's end, Samsung will stop taking orders for DDR3

• Samsung recently told its customers that it would stop accepting orders for DDR3 SRAM modules by the end of 2022. Samsung intends to continue shipping 1-GB, 2-GB, and 4-GB memory fritzes through 2023 but is shifting its capacity to manufacturing more CMOS sensors. Management believes the best path is to move production capacity to newer and more lucrative parts. Since the market is so volatile, this strategy makes a lot of sense from a financial perspective. [1]

2) A shortage of analog ICs is pushing lead times and pricing up

• According to industry insiders, the persistent shortage of analog IC will not improve in the foreseeable future. On a positive note, IDMs specializing in these types of components believe the shortage in this segment has eased since last year. The main cause of the component shortage - limited space in 8-inch (200mm) factories - is being addressed. SEMI recently reported that global 200mm production capacity will increase by 21 percent between 2020 and 2024. This means that manufacturers will be able to increase their production of analog components, MOSFETs, display drivers, MCUs, PMICs and sensors. [2]

3) Global MCU supply remains tight

• According to industry insiders, the ongoing shortage of analog IC will not improve anytime soon. Chipmakers are looking to partner with foundry service providers with 12-inch (300mm) production capacity to manufacture their automotive and industrial parts. SEMI recently reported that global 200mm production capacity will increase 21 percent from 2020 to 2024. This change and uncertainty about consumer electronics demand should provide some stability in the analog sector IC. Building or expanding chip factories and equipping them with suitable machinery and personnel is a slow process. [3]

How has the shortage impacted the electronics industry?

The shortage of electronic components has caused serious problems for the electronics industry. The just-in-time build-to-order pipeline model that the electronics supply chain has used for over two decades was not designed for the sudden surge in demand for consumer electronics. As a result, factories are struggling to keep up with demand, and there's a chance we will see fewer products on the shelves this vacation season. The shortage of electronic components is also likely to impact other industries that rely on electronic components, such as the automotive and aerospace industries. In addition, companies will likely pass on price increases in electronic components to consumers in the form of higher prices for finished products. The shortage of electronic components is a serious problem that could hurt the global economy.

From our point of view, it's basically a question of supply and demand. From an electronics design and development service provider's perspective, the shortage of electronic components is a major challenge for OEMs and EMSs, and there are some common ways to address the current challenges.

Traditional procurement methods do not work well in a market characterized by shortages. Supply disruptions will likely continue for years, so teams must adapt their strategies, processes, and procurement procedures. Knowing how best to deal with this and how to effectively mitigate component shortages is critical. Some helpful hints may include:

1. Use alternative sources of components

2. Change designs to use different or less expensive components

3. Replenish inventories of critical components

4. Replace scarce components with less expensive or more easily procured ones

5. Postpone production or release of products until shortages are resolved

6. Work with suppliers to increase production capacity or find new sources of supply

When will the shortage end?

From 2021 to 2028, the global active electronic components market is expected to grow at a CAGR of 9.2%, according to a report by Grand View Research. The main factor driving the market is the rapidly increasing demand for consumer electronics devices, such as smartphones and laptops. This means that the current shortage of components will continue in the future unless investment in manufacturing capacity is significantly increased. Companies are desperately seeking solutions to mitigate the shortage with their current sourcing methods. There is a need to adapt methods, processes, and procurement procedures. [4]

In addition, back in April, Intel CEO Pat Gelsinger said he now expects the semiconductor industry to suffer supply shortages through 2024. He said that the global chip crisis could drag on because of the limited availability of crucial manufacturing tools. His comments come a day after the chipmaker issued second-quarter guidance that fell short of Wall Street expectations. [5]

Also, IC Insights recently forecast that global silicon wafer capacity will grow 8.7 percent annually this year. The organization expects 10 new fabs to come online by 2022, bringing global wafer production to its highest level in six years. In addition, TSMC recently told Nikkei Asia that chip manufacturing equipment supply issues had affected its plans to expand capacity in 2023. However, the world's largest foundry services provider said its 2022 roadmap has no issues. [6]

Given the recent trends and issues described above, as well as personal experience in procuring these electronic components, the situation seems better than it was a year ago, with more companies trying to ramp up production, albeit with difficulty. However, even as we move from the bottom of the supply-demand curve toward normalcy, signs don't point to a real turnaround before 2023.

Conclusion:

The electronic components market is changing rapidly, and companies that can adapt quickly to the new landscape will be more successful in the long run. By understanding the factors that lead to the shortage and taking action to overcome them, you can ensure that your company remains competitive in this ever-changing industry.

Looking ahead, it's important to stay up to date on the latest trends and research in the industry. Stay up to date on the latest findings in the electronics industry by subscribing to our newsletter and visiting our post regularly. You can also follow us BECS Inc. on LinkedIn to keep up with the latest news from the electronics industry and the world that surrounds it.