Here is Your Supply Chain Bulletin November 2021
Continued worldwide raw material and labor shortages mark another month of severe constraints. Many are predicting this market constraint will now continue into early 2023 at a minimum.
|Update on Passives|
While IP&E products remain relatively stable, manufacturers are experiencing increased demand and some labor shortages due to COVID-19 in some countries and other factory challenges. Overall lead times are extending by two to three weeks plus creating some supply constraints.
The following is an update by technology:
During the first half of calendar year (CY) 2021, interconnect manufacturers experienced increased demand for products while also managing raw material (i.e., plastic resin and some metals) and labor shortages.
Resin and metal availability improved by the end of CY Q2 with the remaining issues focused on specialty materials (high-temp, unique size, etc.). Labor shortages related to COVID-19 has impacted manufacturing and distribution of finished connectors from the manufacturer’s facilities and processing through U.S. ports.
As a result, interconnect lead times have increased by an average of four weeks over the past year to a range of 8-30 weeks. Additionally, manufacturers have increased pricing by 7-15% to cover increases in raw materials, transportation and labor costs. While lead times are expected to be flat through CY Q3 and slightly down by the end of Q4, we expect additional price increases up to 5% by the end of CY2021.
Passive component suppliers are seeing constraints in key products such as MLCC capacitors, molded polymer and tantalum chips, resistor chips and electrolytic capacitors.
These constraints are mainly due to strong demand in networking related to increased virtual meetings, schooling and medical services; in 5G networking and across the automotive segment. Handsets and tablets are also driving strong demand in small case size components, especially MLCCs. While much of the increased demand is originating from Asia, there is still supply impact in the Americas. Although the “mix” of product is often different in the Americas (for example, very small case size MLCC in Asia versus standard size in the Americas), there is a ripple effect due to factories managing the overall demand across the portfolio.
Passive lead times are extended to 30+ weeks for many of the mentioned technologies and in the case of resistor chips, we are even seeing allocation. In addition to key end segment drivers such as automotive, suppliers are also experiencing logistics challenges tied to container shortages and freight carrier delays.
Semiconductor Market Updates
The industry’s largest manufacturers continue to advise of capacity challenges in assembly and test processes with most expected to persist through the end of 2021. Many suppliers are attributing their price increases to the significant capital expenditures that they are required to make to align capacity with customer demand signals during the first half of 2021.
Additionally, semiconductor suppliers continue to see demand outpace supply. They are carefully tracking inventories and other metrics to pinpoint signs of over-driven demand. We are seeing a few more suppliers shift large portions of their business to Non-Cancellable Non-Returnable/Reschedulable (NCNR).
Suppliers have been increasingly reticent to confirm all demand forecasted for the fourth quarter of calendar year (CY) 2021 and first quarter of CY 2022.
While significant lead time increases have stabilized, the market remains extraordinarily constrained.
– 58,900 containers are racking up $100-per-day fines at ports in Southern California.
– Shipping companies will be charged on November 15 for containers that linger in ports for over 9 days.
– Experts told Insiders they expect the fines will do little to move the goods out of the ports.
Currently, 58,900 shipping containers are racking up fines at ports in Los Angeles and Long Beach. Last month, the Southern California ports announced that they would begin fining shipping companies $100 per day for every container that was left behind at the terminals for over 9 days. The fee will also increase by $100 for every day the container lingers past the time constraint.
The ports began collecting data this week, and plan to start charging the companies on November 15.
– Prepreg and copper-clad laminate are still in short supply; this is driving prices higher and extending lead times. Due to an increase in demand of PCB’s we have seen copper foil pricing increase by over 30% this year.
– Epoxy resin is in short supply and is also subject to price increases.
The electronics component market is still in a state of flux. Raw material shortages are ongoing, with diverse industries feeling the strain. And with many component manufacturers at full capacity until the end of the year, forward orders will be critical for securing product into 2022. In addition, general labor shortages are having an increasing effect on non-electronic components through-out the supply chain.
WE ARE HERE TO HELP.
During times like this, It is highly recommended to extend order coverage as much as possible to identify supply chain issues early on, when mitigation is still possible.
We may recommend changes in purchasing volumes and forecasts to mitigate risk.
Gary DeGrave, Corporate Director Supply Chain