The shortage of electronic components is escalating like a snowball rolling down a mountain, threatening to become an avalanche. What started as an issue for the automobile industry has now spread out to many other markets that require electronic components. Computers, cell phones, and many other devices have all been jeopardized by this shortage.
Many initially hoped that this shortage would pass quickly, but several issues have converged, making the situation worse. The global pandemic introduced new problems into the supply chain and exacerbated the pre-existing. The important thing now is to focus on repairing the damage to move forward. Here are some updates on the electronic component supply shortage and what to expect next.
The Beginnings of the Electronic Component Supply Shortage
When the global pandemic hit in 2020, most economists expected the world’s economies to shut down quickly. As predicted, sales for the automotive industry dropped dramatically as people stayed home due to social distancing regulations. Simultaneously, demand for consumer electronics rose as the public began working, schooling, and entertaining at home. Without the need for automobile microchips, many semiconductor fabricators switched their production lines to the components needed for consumer electronics.
Switching the manufacturing of a microchip is not simple. It can take months to bring a new run of components up to full production and much longer to build and equip new factories for additional manufacturing. Another complication in switching production of semiconductors is the change in manufacturing technologies. Many automotive components are made using older fabrication methods, which had to be updated when chip makers switched over to newer parts for consumer electronics. All of this was under control until the unexpected happened; the automotive industry rebounded faster than expected.
Electronic components have become an essential part of building a car as they exist in all the main vehicle systems. These systems include:
- Environment controls
- Entertainment systems
- Navigation displays
- Collision detection
- Ride stabilization
- Engine performance
Without any one of the components needed for these systems, the cars could not be completed, and assembly lines were severely limited in their production. In some cases, production shut down completely. This shortage put chip makers in a real bind, as they had already switched over their production lines and didn’t have the bandwidth to switch back. Then the next domino in the supply chain fell.
From Automotive Semiconductors to the Rest of the Electronics Markets
Microchip production is based on the projected needs of the industries that use those components. In the automotive industry, the projections had fallen, while other sectors saw an increase. As pointed out earlier, the consumer industry saw additional demand for their products as people required new electronics to support their activities at home. Some such activities include:
- Work: Computers, communication, and display systems became hot sellers as people configured their home offices for work.
- School: The same equipment required for the home office was needed in virtual classrooms, including tablets and phones.
- Security: Many people chose to upgrade their home security systems during the pandemic with new cameras and smart home devices.
- Entertainment: For the off hours, new TVs, audio equipment, and gaming systems were in high demand.
- Communication: The pandemic forced many people to update their communication systems to hold video gatherings with family members and friends.
Consumer devices were not the only electronics that increased in demand. The need for new medical equipment used in diagnosing and treating COVID-19 also put additional pressure on chip makers to supply the demand.
While the industry demands were in flux, semiconductor fabricators also had problems to navigate. Some fabricators had labor problems due to the effects of the pandemic and were running at partial capacity. These facilities recalled workers as soon as it was safe to ramp back up to full production. Unfortunately, as each supply chain problem resolved, another popped up in its place.
What to Expect of the Component Shortage Going Forward
With the rollout of new technologies, like 5G, new telecommunications, electric vehicles, and more, the demand for new semiconductors continues to rise. The rebounding automotive industry, existing consumer electronics markets, and the latest technology rollouts have pushed new component manufacturing capacities to a critical point. Fortunately, the semiconductor industry has responded by enhancing existing production lines and investing in the expedited construction of new facilities. The uncomfortable reality is that it will take time before the manufacturing overload can level out. The latest predictions claim that component shortages will improve towards the end of this year, but they won’t fully recover until well into 2022. In the meantime, electronics OEMs should expect to contend with these component shortages as larger companies continue to buy out existing stocks to supply their needs. Regardless, there are some things OEMs can do to protect themselves.
The key for OEMs to get through this current part shortage is to partner with a PCB contract manufacturer that understands the ins and outs of the component supply chain. Here at VSE, our purchasing agents have years of experience working with a vast network of component manufacturers, distributors, and brokers. With our component reporting tools and the relationships we’ve built up with our supply chain network, our agents always find the best component prices and availability. If a component is no longer available, our component engineers will work with you on form, fit, and function replacements to ensure that your circuit board production stays on time and budget.