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February 10, 2021
Supply Challenges Hitting Active Components the Hardest
This time around, active components have been hit hardest with shortages. At the moment, microcontroller and Mosfet supply are bearing the brunt of the availability challenges. Tantalum capacitors and some crystals are also feeling the pinch. Price increases are coming with the shortages as well.  

Shipping capacity is also a big issue. You may not know it, but our supply chain relies heavily on the cargo capacity of commercial passenger airline flights. With international passenger air travel being down by 80%, our industry has lost a huge amount of fast-ship capacity. That means that those component orders now need to go by boat or by more expensive air charter. Even shipping containers and seaport capacity of overloaded right now. It’s an extreme situation that will take a while to unwind.  

Don’t ignore your passives. Right now, we aren’t hearing strong warnings about passives as we were back in 2018. However, as soon as the silicon components free up, people will be ramping up builds again and will need a lot of passives.  

1. Keep in close contact with your program managers and work with them to extend your forecasts and future ordering windows.
2. Be quick and creative with your substitutions. You may even need to consider minor re-designs to give yourself more flexibility with alternate chips.
3. Don’t forget passives. You may want to order ahead – especially on the more common parts – to make sure you have good supply when the silicon is back in the bin.
Here is Your Industry Supply Chain Overview
A new year is usually a time for forward planning, and reflection on previous successes. But for so many, the turmoil of 2020 has shaken business models, employees, and supply chains, leaving many with an unclear vision of the future. With 2020 only described as ‘unprecedented’, what could 2021 have in store for our industry in particular?  

Looking back, 2020 saw many economic global changes, and of course, the devastating impact from the COVID-19 pandemic. Inevitably, this has caused widespread difficulties in the marketplace and supply chain, with all areas of the economy feeling the pressure. Not only were we having to adopt new behaviors to curb the spread of the virus, but in tandem, supply chains needed to constantly adapt to other ‘firsts’ including ‘Brexit’, increased freight charges, reduced freight availability, constraints at ports, extended lead-times, raw material shortages, allocation and price increases.  

Many countries have now shown advanced processes for developing, approving and administering COVID-19 vaccinations throughout the population, with the most vulnerable and their support infrastructure receiving vaccinations from December 2020. This brings hope, that 2021 will see the world returning to more of the ‘old normal’ than the ‘new normal’ that has been adopted since Q1 last year. The world, and economy still has a very long road ahead, but signs of progress can already be seen.  

With the news of ‘normality’ on the horizon, unfortunately, this is unlikely to be as pronounced for the manufacturing supply chains. There is always a lag between event and outcome, but here in the electronic and electro-mechanical world, we have mountains to climb before we are able to breathe a sigh of relief – there is however, light at the end of the tunnel.  
Capacity & Lead Time Issues
There are significant disruptions with all electronic and electrical component supply chains and lead-times have been, and will continue to extend. Unfortunately, they are not product, series, or manufacturer specific, so the best way to mitigate is give full visibility to your EMS partners and allow them to manage and leverage the supply chain effectively.  

– Foundries are at full capacity and are having issues with wafer availability. These foundries overall have no plans to expand capacity, and it is impacting foundries such as Taiwan Semiconductor Manufacturing Company who are operating supplying fabs for their own lines, as well as fabless manufacturers such as Qualcomm.
– Manufacturers seeing issues with capacity include ADI, Texas Instruments, Vishay, NXP, ST Micro, Molex, JST, Microchip, Murata, AVX, Yageo and others. This is a ‘perfect storm’ of COVID constraints, reduce capacity, reduced output, uptake in demand from the Far East, global 5G and EV initiatives, IOT, distance/remote working and learning, border delays and closures as well as slow moving freight due to increases costs and lack of means to transport goods.  

– Shortages at paper mills are increasing paper and cardboard pricing, with corrugated card being particularly impacted by increased lead-times and prices (5% price increase, 8-week lead-time)  

– TE Connectivity are struggling still with allocation on relays (52 weeks), this has been ongoing for at least 12 months, and is showing no signs of improvement yet.  

– Lead-times of Vishay IHLP are continuing to show as 70 weeks plus, no improvement has been seen for several consecutive quarters.  

– Broadcom lead-times are now 50 weeks; it is worth securing stock and forward ordering for at least Q1 and Q2. However, over-securing will lead to allocation, so as always – ensure you are communicating your demand with your supply chain partners to ensure appropriate order coverage and supply chain stability.  
Pricing Uncertainty
Pricing is still volatile, with last minute manufacturer increases across the product range – some are significant, and unfortunately, they are also global. Here is a list of price increases by type & percentage:  

– 5% on cardboard

– Microchip price increases

– AVX price increases overall.

– NXP significant raises throughout 2021 on all products

– Xilinx increases for Spartan 6, Kintex 7 and Virtex 6&7

– Increases for Bussmann, TE, Burket, HMS, P+F, ABB, Wago.

– SiliLabs and Cypress increases expected between 10%-20%.

– STM 5%  

Manufacturer price increases are to be expected to continue throughout this year without warning, especially for items that have lower global demand, are considered legacy product or have raw material increases/shortages, for example Silicon.
We are Here to Help
During times like this, it is important to keep in close contact with your EMS Program Manager to manage supply and lead times. We may recommend changes in purchasing volumes and forecasts to mitigate risk.  

Gary DeGrave, Corporate Director Supply Chain
Milwaukee Electronics