Increase in the global demand for electronic components

Louise Smyth

Currently it’s not uncommon for the lead-time for supplies to be stretching more than 30 weeks with a number of manufacturers including Yageo, Micron, Panasonic and STM all offering extended lead-times. And it would appear there’s no short-term relief in sight, with industry experts predicting supply problems to continue well into 2019 and beyond.

So what’s been driving this demand for electronic components? And what can Electronics Manufacturing Services (EMS) providers do to ensure that they’re supported in the future? A significant contributor to the scarcity of components has undoubtedly been the unprecedented growth in the smart phone, automotive and industrial markets and the explosion in the Internet of Things (IoT).

The release of any new device or product inevitably provokes a spike in consumer demand, which in turn places pressure on the manufacturers of essential electronic components. And after many years of relative stability, it would appear semiconductor manufacturers in particular have been caught off guard by not making the necessary investments to enable them to respond to the surge in demand and up their production capacities. When multiple companies are fighting for the same limited supply of products then it stands to reason that franchise distributors and component manufacturers are going to seek to prioritise the needs of their most valuable clients first.

Technological developments within the automotive industry have also had an undeniable effect on electronic component supply, as automobile manufacturers look to add innovative new electronics-based products (sensors) such as advanced driver assistance systems (ADAS) into their vehicles, same to the IoT - from wearable products, smart meters, intelligent car, smart home/building/traffic..etc.  

So the question is then: what should EMS providers be doing to safeguard their own supply chains and to ensure they’re able to get the parts they need when they need them? They’ll have built strong relationships with the right distributors and they’ll have robust supply agreements in place which should enable them to access good levels of stock when they need it the most. Your EMS provider will, of course, have strict processes in place – from painstakingly selecting and auditing their suppliers, to creating and managing a reference database and thoroughly inspecting all components on receipt. The best companies will insist on a two-step inspection and verification process, one of which is carried out by the component supplier prior to shipment and then one again when the parts have been received by the EMS provider. Finally too, you can play a vital role in supporting your EMS partner by responding quickly to any price or lead-time issues, by asking your EMS partners and own engineering teams to suggest alternative components where possible and by sharing your demand forecast as far in advance as possible, pre-purchase stocking based on sales forecast demands.

Asa Huang is with 3CEMS Group / PRIME