Global shortage of electronic components will continue this year, even with electronics market picking up the pace, according to Supplyframe, which just unveiled the results of its latest Commodity Intelligence Quarterly Report that provides an overview of market dynamics (pricing, lead time, demand…) in the electronics industry.
The new year begins with continuing commodity challenges that exhibit only slight signs of relief through the first semester. Many raw material suppliers continue to impose price increases on elevated logistics costs, with lead times extending and factories operating at full capacity. Most electronic component lead times are also expanding, with 70% of all lead time dimensions forecast to increase.
Strained assembly & test outsourcing, limited production capacity, labor shortages, and spontaneous pandemic-related disruptions persist, as do component price pressures. The number of commodity dimensions with red status declined quarter-on-quarter for some commodities, reflecting cautious optimism for the second half of the year as new capacity comes online. Yet for complex semiconductors, frequency control devices, analog components, and some resistors – severe supply constraints and price escalations are anticipated for all of 2022 and into 2023.
“Last year we saw unprecedented electronics commodity demand across end market segments, and our new data indicates that voracious demand will continue in 2022, driven by consistent consumer spending and infrastructure investments in a variety of markets” said Steve Flagg, CEO and founder of Supplyframe. “The 277% year-over-year increase in design activities uncovered by our Design-to-Source Intelligence (DSI) Network provides evidence of this trend.”
Between Q4 2021 and Q1 2022, aside from oscillators, all components will see an increase in numbers when looking at design and production. Fiber optic is the one that stands out the most, with a design increasing by 27% between Q3 and Q4, followed by sensors (15%) and circuit protection (15%). When comparing the situation between Q1 2021 and Q1 2022, inductors are the ones who will see the biggest increase year-on-year (21%), followed by relays. It’s worth noting that, even though fiber optic design and production will increase in Q1, it’s the only component whose year-on-year design level saw a decrease (1%).
In terms of demand, aside for PLDs (Programmable Logic Devices), it will decrease for all components if we compare between Q4 2021 and Q1 2022. The components who will see the biggest decrease are crystals/resonators (19%), followed by oscillators (12%), capacitors (12%) and inductors (12%). Looking at the year-on-year comparison, however, it’s another story: demand keeps increasing when comparing the situation between Q1 2021 and Q4 2022. The components with the biggest increase are transistors (144%), followed by signal devices (122%) and PLDs (118%).
“As Commodity IQ highlights, the new year begins with continuing commodity challenges, some of which will drag into next year” added Flagg. “However, a cautious optimism exists for passive components in the second half of the year, particularly for standard connectors and ceramic capacitors, suggesting the passives market will recover faster than its actives counterpart. Pricing and lead time dimensions across most passive commodities are forecast to stabilize beginning in Q3.”
To cope with the shortage situation, companies and public organizations alike are planning to define strategies that build resilience and boost domestic capabilities, thereby becoming less reliant on regional and global supply chains. Companies should investigate alternatives in terms of supply chain flows, as well as inventory storage capabilities closer to their customers.
Extended partnerships with a broader list of suppliers and partners at every step of the way (production, transport, logistic, distribution…) will also be a crucial point for businesses if they want to properly equip their supply chain. This equipment update will also involve more investment in technology and digital transformation, as businesses seek to enhance critical supply chain planning capabilities by adopting more advanced digital enablers based on emerging technologies – AI, blockchain tracing, analytics… – to get greater integrity and visibility into secure supply chains.
“2021 has remained challenging for everybody in the industry and 2022 is shaping to be quite similar and just as difficult for everybody involved in the supply chain. Today, companies should no longer wonder when this shortage will come to an end: the reality is that it’s not going to end anytime soon, so instead we should look at how to best live with it and accommodate. Much like the pandemic that has forced everybody around the world to rethink the way they work and live, this shortage situation – even though it seems to be evolving in the right direction – is here to stay, so the industry must come together to adapt and overcome this long-term hurdle” declares Richard Barnett, CMO at Supplyframe.
[Image: Angeles Perez for Unsplash]