Electronics Component sector is in for another period of shortages and allocation.
What are the reasons?
If all current predictions are correct, then the Electronics Component sector is in for another period of shortages and allocation. The effects of this are already showing in other sectors. As always there are a lot of reasons for these periods of component allocation:
- Rise in demand
- Obsolescence issues
- Company mergers
- Supply chain disruptions
- Capacity of production at manufacturing sites
The lockdowns that various Governments around the world have been implementing this year has meant that only essential businesses could continue operations. Industries in the Philippines and Malaysia were hit from March and until mid-April. This particular stoppage is one of the reasons that allocation is now being brought to our attention again.
These two countries make up part of the manufacturing hubs for the likes of Texas Instruments, NXP, Xilinx, Cypress, Littlefuse and Maxim and as such, this closure of production is now starting to ripple through the industry.
What problems does this give rise to?
From our perspective at Retronix, we have seen customers reporting that they are stepping outside of the approved suppliers to source the components they require.
“This leads to possible counterfeit and faulty components being introduced into their supply chains.”
How long is the allocation predicted to last?
The shutdown of manufacturing of components has meant that industries that drive demand like automotive have also been on shutdown. In turn, this means that there is a possibility that this period of allocation may not be as impactful short term as the allocation of 2018. And given the fact that the industry was only starting to see the ending of that 2018 allocation, we can only hope that this time around the industry recovers quicker.
But with the slowdown in automotive manufacturing, amongst others classed as non-essential, there was, of course, the spike in manufacturing for medical equipment. Many component manufacturers prioritised the delivery of components to the building of ventilators and other equipment with a predicted extra 880,000 ventilators required worldwide.
As this period of history is unprecedented, analysts can’t make predictions using historical data as to the long-term impact and the length of time this allocation period will last. With all of the challenges, this year has thrown at us – we hope that the industry will overcome this allocation challenge without too much long-term damage.
What is the solution?
Retronix have had an upturn in our testing services as we act as a third-party test house to help our customers verify their new suppliers. Our testing services alongside services such as –component reclaim, retinning and alloy conversion are tools that we can offer the industry to assist our customers and support them through the tough times of allocation.
