‘Perfect Storm’ Causes Shortages in Electronic Components Supply Chain

“Now, with the development and promotion of several COVID-19 vaccines, industries are ramping up production again, and demand for Electronic components has skyrocketed. Here’s a look at what causes pain points and how procurement professionals deal with product shortages.

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Margaret Cunha, Director of Regional Supply Chain Solutions at Digi-Key.

We are in what can be called a “perfect storm”, which is causing severe shortages in the supply chain of electronic components.

Even before the COVID-19 pandemic, supply chains were already beginning to show signs of shortages, and the global pandemic that began in 2020 was far-reaching, forcing production of these vital parts to slow down or shut down for days, weeks, or even months. .

Now, with the development and promotion of several COVID-19 vaccines, industries are ramping up production again, and demand for electronic components has skyrocketed. Here’s a look at what causes pain points and how procurement professionals deal with product shortages.

surge in demand

Demand for components is growing rapidly in nearly every industry, including the automotive, smartphone, medical, and IoT markets, all of which simultaneously require more and more components to complete their products.

For example, as many as 22,000 multilayer ceramic capacitors (MLCCs) are required per electric vehicle engine, and smartphone makers alone use about 1.5 trillion MLCCs, accounting for 50 percent of global production.

Furthermore, according to a Gartner report, the IoT market is expected to grow from $212 billion in 2018 to $1,319 billion in 2026, an increase of more than 6x. IoT products such as smart home thermostats, doorbells, alarm systems, cameras, appliances, fitness equipment, all require sensors and multiple components to work.

This increase in demand has certainly weighed on suppliers, but overall it is a positive sign of recovery.

Suppliers try to keep up

While demand is rapidly increasing, supply is under enormous pressure due to the pandemic and the deteriorating external environment.

Among the many factors affecting manufacturers, one of the main factors is reducing the number of business personnel to comply with mandated social distancing and other workplace COVID prevention policy requirements.

Additionally, due to similar reasons, extended cargo transit times across all industries and countries, reduced commercial flights, and port issues leading to delays in product transshipment and material receipts, including of course the recent blockage of the Suez Canal, this is expected to increase globally. Weeks of ripple effects in the trade.

Systemic problems such as insufficient investment in eight-inch fabs have made it difficult to speed up production. Without significant investment in the early stages of a fab, the supply chain could suffer years later. Unfortunately, the underinvestment in this very standard size many years ago has led to such a serious problem now.

Climate change is also causing more and more extreme weather patterns, putting pressure on local areas, such as in Taiwan, where severe drought forced some manufacturers to truck water to maintain production, causing delays that could last until June 2021.

Multiple fires from Japan’s Asahi Kasei Micro (AKM) and Renesas Electronics to Taiwan’s Kaohsiung PANJIT International plant also affected production. All of these factories are critical to the production of certain oscillators, semiconductors and chips, and it could take several months to resume normal production.

Despite these challenges, suppliers are doing their best to meet demand, getting components into the hands of engineers around the world around the clock.

experience wind and rain

The good news is that many distributors (such as Digi-Key) predicted this dramatic increase in demand months ago and are proactively investing in inventory, while working closely with suppliers to speed up orders to ensure there are Sufficient product is available to customers despite current global shortages.

Digi-Key has a wide range of components, including 2.6 million off-the-shelf products from more than 1,700 manufacturers, and working with a global distributor like Digi-Key ensures customers will find what they need among the 11.8 million products available product.

In addition, Digi-Key maintains ongoing relationships with suppliers, maintains long-term relationships with major manufacturers, and invests in substantial inventories to help customers navigate the “perfect storm” now and in the future. Digi-Key has also developed a suite of digital solutions that help clients integrate technology and digital strategies to speed up communication and better use data for planning and procurement. Digi-Key offers three powerful digital solutions, including API (Application Programming Interface), EDI (Electronic Data Interchange) and Punchout, all of which help customers maximize efficiency and speed to improve operations through automation. For more information, see Decrypting the Digital Transformation of Procurement, a free e-book from Digi-Key.

Margaret Cunha is Regional Director of Supply Chain Solutions at Digi-Key Electronics. Digi-Key Electronics is one of the world’s largest full-service distributors of electronic components, distributing more than 11.8 million products from more than 1,700 premium brand manufacturers, of which more than 2.6 million are in stock and ready to ship.