13 January 2022
Will continued global Covid measures extend electronic component shortages?
Continued global Covid measures will likely extend electronic component shortages, hindering manufacturers for several years.
The coronavirus pandemic has reshaped the global economy irreparably. Demand for electronic components has shifted, supply chains are broken, and new, more infectious variants threaten to bend normality further.
It looks like the world is running out of electronic components, but there’s more to shortages than meets the eye.
The coronavirus pandemic is the biggest reason behind component shortages. With this single statement, we can deduce that shortages will subside when the pandemic subsides, freeing up supply chains through fewer restrictions.
However, we know the coronavirus isn’t going anywhere, and its persistence and ability to evolve means we have to learn to live with it.
Add raw material shortages, soaring prices, low investment in new manufacturing facilities, and geopolitical issues related to supply and demand. Now we have a recipe for several years of component shortages.
How covid reshaped supply chains
In May 2020, the first wave of the coronavirus pandemic hit most of the world. Countries locked down, and most sectors of the economy suffered.
Demand for some categories decreased, while demand for others increased. For instance, demand for vehicles evaporated while demand for home computers soared, creating an imbalance in the supply chain.
Estimates suggest that vehicle sales fell by 50% or more within a single month. In response, vehicle manufacturers scaled backorders for components.
At the same time, demand for electronics chips and parts soared as more people spent time working from home.
When demand ramped back up for vehicles, there weren’t enough components to serve them and electronics. This is a story shared by multiple industries, with supply chains broken by supply and demand imbalances.
The matter wasn’t helped by local and national lockdowns, circuit breakers, new variants, and mitigating problems like floods and climate change.
There is no easy solution or fast fix
The pandemic has also caused prices for common and rare earth metals to explode, increasing over 70% since the start of 2021 for some metals. These prices are made even worse by soaring inflation.
Trying to build supply chain resilience during the coronavirus pandemic is like trying to build a house of cards on a jittering floor. Just when you think you have it, something comes along that knocks it down, and you have to start over.
The simple fact is that the world needs more factories to make components, and it needs to get a grip on inflation. The Covid pandemic is not going away, although the virus appears to be getting milder, which is a good sign for the future.
You can bolster your supply chain by working with an electronic components distributor like us, increasing your inventory, and quickly moving to equivalent components when you experience shortages of active and passive components. Email us today with your component inquiries firstname.lastname@example.org
Although global Covid measures are likely to extend electronic component shortages, there is no reason why they should stop you from doing business.
22 December 2021
What is causing the surge in semiconductor and passive components?
As the world becomes smarter and more connected, the components used in electronic circuits are seeing a surge in demand.
Semiconductors and passive components (resistors, capacitors, inductors, transforms) are seeing a surge in demand as chip-heavy vehicles, consumer electronics and smart, Internet of Things devices are produced in larger quantities.
This demand is creating a shortage of semiconductors, integrated circuits and passive components. The situation today is that the factories that make certain components can’t make enough of them. This squeezes supply chains and ramps up the price, creating a high level of inflation passed down the supply chain.
The surge in semiconductor and passive component demand has reached an inflexion point. Demand has outstripped supply for many components, leading to car manufacturing lines shutting down and companies delaying product launches.
Tailwinds fuelling demand
- Smart vehicles
- Consumer electronics
- Military technology
- Internet of Things
- Data centres
- Artificial intelligence and robotics
At no other point in history has there been so many exciting technologies developing at the same time. However, while exciting, these technologies are putting strain on the electronic components supply chain.
Passive components include resistors, capacitors, inductors, and transforms in various specifications. There are thousands of makes and unit models. They are essential to making electronic circuits. Without passives, there are no circuits!
Cars, electronics, satellites, 5G, data centres, Internet of Things, displays, and everything else powered by electricity, depends on passives. As devices get smarter, more components are needed, creating a cycle that will only go up.
Certain diodes, transistors and resistors are in shorter supply than in 2020. This is partly because of the coronavirus pandemic, which impacted manufacturing lines. Still, many manufacturers also shifted manufacturing investment to active components with a higher margin, creating a supply imbalance.
Even without these significant bottlenecks, the supply of passive components is downward while demand goes up. For example, a typical smartphone requires over 1,000 capacitors and cars require around 22,000 MLCCs alone. We’re talking billions of passive components in just two sectors.
Semiconductors (chips, in this case, not the materials) are integrated circuits produced on a piece of silicon. On the chip, transistors act as electrical switches that can turn a current on or off. So, semiconductors and passives are linked.
Chips are effectively the brains of every computing device. Demand for chips is increasing as circuits become more complex. While chips are getting smaller, manufacturing output is only slowly increasing, creating a supply shortage.
The semiconductor shortage was years in the making, but things came to a head when the coronavirus pandemic hit.
At the start of the pandemic, vehicles sales dived. In response, manufacturers cancelled orders for semiconductors and other parts. Meanwhile, electronics sales exploded, filling the semiconductor order book left by the automotive sector. When vehicle manufacturing ramped up again, there weren’t enough chips to go around.
Manufacturing limitations are confounding the problem. It takes 3-4 years to open a semiconductor foundry or fabless plant, but investment in new plants in 2018 and 2019 was low. So, new plants are few and far between.
15 December 2021
Obsolescence Management Before It Becomes A Problem
Like the device you are reading this on, all electronic components become obsolete eventually. As a supply chain manager, it is your job to manage obsolescence and make sure it doesn't become a problem for your company.
The three reasons for electronic component obsolescence are short product life cycles, innovation, and increased demand.
Short product life cycles fuel update cycles that demand better components, innovation fuels new component releases, and increased demand squeezes supply chains, creating new batches of components that replace the old.
The good news is obsolescence management isn't rocket science. With planning, you can safeguard your supply chain from the inevitable. Cyclops can help you do this in various ways, working with you to keep your supply chains moving.
How Cyclops helps you manage obsolescence
With technologies advancing rapidly, the rate of electronic component obsolescence is picking up pace. Life cycles are getting shorter for many components, and shortages are challenging obsolescence management plans.
At Cyclops Electronics, we specialise in the procurement of electronic components, working with global distributors to source tens of millions of parts. Our staff go further than most to find your obsolete parts, and if we can't source the exact parts you need, we will work just as hard to find appropriate alternatives.
Here's how we help you manage obsolescence:
We keep tabs on component supplies for you and provide timely reports detailing risks. By keeping you in the loop, you get a bird's eye view of your electronic components, giving you a competitive edge and greater buying power.
Obsolete component sourcing
Obsolete components might no longer be made, but we hold 177,232 line items in our warehouse and 14 million parts globally. There's a strong possibility we have the obsolete, discontinued components you need ready to go.
When obsolete components are unavailable, we can specify equivalents that meet your performance and financial specifications. We can cross-reference many components, such as semiconductors, to find exact equivalents.
We can help you identify and mitigate risk when parts and spares become obsolete by integrating with your mitigation plan. We can replace obsolete parts as they age, providing an automated, streamlined obsolescence solution.
Obsolescence is inevitable but manageable
Component obsolescence occurs when an old component is phased out. Without management, this event can disrupt a supply chain, costing businesses tens of millions (or billions) in lost revenues and corporate costs.
A great example of this is any company that manufactures equipment and supports it over several years, like a boiler company. Electric boilers are supported for around ten years, so the components have to be replaceable over that time.
Obsolescence is a problem because it sends ripples through the supply chain, requiring ongoing management to foresee events and mitigate risks. Cyclops Electronics has seen all this before across all sectors.
Speak with us about obsolescence management
We're here to help you manage supply chain risks and deal with obsolescence before it becomes a problem. Contact us here.
08 December 2021
Semiconductor Supply Chain Will Remain Vulnerable Without Robust Investment in Advanced Packaging
A new U.S. study has found that the advanced semiconductor packaging supply chain needs strengthening to meet the increasing demand for chips.
According to the report, without robust federal investment, the semiconductor supply chain in the U.S. faces an uphill battle to meet demand.
The study also highlights the crucial role of advanced packaging in driving innovation in semiconductor designs. At present, most of the chips in the U.S. are sent abroad for packaging and assembly into finished products. By moving packaging to North America, the entire electronics ecosystem can be improved.
“Semiconductor chips are critically important, which is why IPC supports full funding for the CHIPS for America Act. But chips can’t function on their own. They need to be packaged and interconnected with other electronic components to power the technology we all rely on, from cell phones to automobiles and beyond,” said John Mitchell, IPC president and CEO. “The data in this report shows that North America is well behind Asia in the advanced packaging of chips and in other key parts of the electronics manufacturing ecosystem.”
The big players in the U.S. include Applied Materials, Amkor Technology, Ayar Labs, Lam Research, Microsemi Semiconductor and KLA-Tencor Corporation. These companies have seen unprecedented demand for semiconductor packaging, with growth predicted to rise as the world becomes smarter and more connected.
Other report findings
The study also found that while the U.S. can design cutting-edge electronics, it lacks the capabilities to make them. This is creating an overreliance on foreign companies, including companies in China, creating considerable risk.
Looking at the most recent data, the study highlights that North America’s share of global advanced semiconductor packaging production is just 3 per cent. In other words, at present, the U.S. is incapable of assembling its own chips.
The study concludes that the U.S. also needs to invest in developing and producing advanced integrated circuit substrates. Advanced integrated circuit substrates are crucial components for packaging circuit chips. Currently, the U.S. has nascent capabilities, putting it behind Europe, China and most other countries.
What can we deduce from the report? That the U.S. is behind in most aspects of semiconductor packaging. Decades of low investment and overseas partnerships have led to a manufacturing ecosystem devoid of domestic talent.
“The findings of this report make clear that, as a result of decades of offshoring, the United States’ semiconductor supply chains remain vulnerable, even with the new federal funding that’s expected,” says Jan Vardaman, president and founder of TechSearch International and co-author of the report. “It’s critical that the U.S. government recognises and responds to industry needs on these systemic vulnerabilities, particularly integrated circuit substrates, where domestic capabilities are severely lacking.”
As the U.S. comes to terms with its poor manufacturing ecosystem, China is ramping up assembly plants. In the face of increasing competition, the U.S. must focus on domestic investment in the near and medium-term. Without robust investment, they could fall further behind and lose out to their biggest competitors.
01 December 2021
A raw materials shortage is set to hit the EV battery supply chain in 2022
The automotive sector is on red alert amid speculation that raw material shortages will impact the EV battery supply chain in 2022.
The lithium-ion batteries in electric vehicles use a combination of rare earth metals like neodymium, praseodymium, dysprosium, and common and uncommon minerals like cobalt and lithium in great quantities.
Recent reports back this, with the global lithium shortage giving EV manufacturers pause for concern. Sky News reports the world needs four new lithium mines per year to make supply meet demand, but the pipeline doesn’t come close to meeting this requirement.
Some EV manufacturers are hoarding raw materials, and the world’s biggest electric car maker, Tesla, is moving away from cobalt to LFP chemistry because they consider cobalt to be the biggest supply chain risk for EV batteries.
The EV industry has a battery problem
Most electric vehicles have a lithium-ion battery pack because Li-ion has a high energy density for its weight and can charge and discharge at any state of charge. The technology is proven, and manufacturing Li-ion batteries is easy.
However, the growing demand for electric vehicles is fuelling demand for EV battery raw materials like lithium, cobalt, nickel, manganese and rare earth metals.
The mines in operation today are not sufficient to make supply meet demand one year from now, which is a cause of great concern in the automotive sector.
Additional factors could confound the problem:
- Price volatility in raw materials (the price of rare earth metals has exploded, moving nearly 50% higher on average since March)
- Battery composition changes (while lithium-ion is the top dog today, solid-state batteries use a lot more nickel and cobalt)
- Trade tensions between countries (China controls 55% of global production and 85% refining output of rare earth metals).
Making supply meet demand
Accurate forecasting is crucial to making supply meet demand. Manufacturers must anticipate fluctuations in the supply chain and make allowances for events.
For instance, no one can predict the next coronavirus pandemic, but a 25% drop in raw material mining output can be incorporated into forecasts.
Manufacturers might also like to look into alternative battery chemistries. As we mentioned before, Tesla is switching the chemistry of its long-range batteries to reduce dependency on cobalt. Other battery manufacturers can do the same to fortify their supply chains.
The downside to switching chemistries is it is only possible following extensive (and expensive) research and development. The world’s leading EV battery manufacturers won’t invest in this area without proof it will turn a profit.
EV battery recycling is another important future step. Swedish company Nothvolt made the world’s first fully recycled EV battery in November. Today, however, Li-ion battery recycling is not economical on an industrial scale.
Another option is limiting EV battery production, either in total volume or in cell volume (installing smaller batteries). With EV batteries becoming more efficient, smaller capacities might not be detrimental to range in the future.
24 November 2021
Global chip shortage to impact electronic retailers holiday season
The holiday season usually marks the start of an electronics sales boon for retailers. Consumers buy more electronics in the lead up to Christmas than at any other time of the year. This year, however, things are different.
This holiday season, the global chip shortage is set to impact electronic retailers, with shortages of popular products like games consoles, graphics cards, smartphones, laptops and tablets likely to persist through to 2022.
Due to problems buying stock, most retailers are bracing themselves for low Christmas electronics goods sales. The global chip shortage means fewer electronics goods are being made, so there is a long lead time from suppliers - some retailers are waiting several months for new stock, only for it to sell out within days.
Consumers should start holiday shopping now
Chips are in critically short supply this year, which has reduced manufacturing output at many of the world’s biggest factories.
Companies like Samsung, Apple, Intel and AMD are experiencing problems getting the chips they need. Today, some chips have delays of over a year, and inventory supplies for chips are running low, putting pressure on supply chains.
All of this means there is a shortage of in-demand electronics goods, from games consoles to smartwatches. The message is simple - consumers should start holiday shopping now to ensure they can get hold of the electronics they want.
It is also crucial that consumers don’t take stock levels for granted. What’s in stock today might be out of stock tomorrow, and many retailers have lead times of several months for new stock. So, if you need it, you should buy it while you can.
Is the chip shortage being blown out of proportion?
We are so used to next-day Amazon delivery and seeing shiny electronics on store shelves that chip shortages appear to be a fantasy.
However, the chip shortage is real - manufacturers are struggling to create enough chips, and suppliers can’t get hold of the inventory they need.
Another fox in the henhouse is chip price increases. Companies are bidding through the roof for components, and prices are rising rapidly. Manufacturers don’t absorb these price rises - they are passed down the supply chain, and eventually, they find their way to the consumer (creating consumer inflation).
Chip prices are increasing for several reasons. The obvious reason is supply and demand economics - the less available something is, the higher the price.
Another significant reason is prices for rare earth metals have exploded over the last 12 months, moving nearly 50% higher on average since March.
Summing up the chip shortage
There is a severe chip shortage happening right now that threatens the availability of electronics goods this holiday season. Prices for chips are also skyrocketing, increasing the price of devices like smartphones and smart devices.
All of this is to say, if you plan on buying some chip-reliant electronics this holiday season, you should start shopping now or face being disappointed.
17 November 2021
The tech industry is bracing for a potential shortage of passive electronic components
By now, everyone has heard of the global semiconductor shortage. Still, the tech industry is bracing itself for an altogether larger shortage of passive electronic components that could reduce manufacturing output across multiple categories.
Passive components do not generate energy but can store and dissipate it. They include resistors, inductors (coils), capacitors, transformers, and diodes, connecting to active elements in circuits. Passives are necessary for circuit architecture, so the shortage is bad news for the electronics industry as a whole.
The current state of the passive component shortage
The truth is there has been a shortage of certain passive components since the coronavirus pandemic hit in 2020, particularly with multilayer ceramic capacitors (MLCCs), which can be difficult to get hold of in large quantities.
Certain diodes, transistors and resistors are also in shorter supply than they were in 2019, partly because of the pandemic and a shift in manufacturing investment for active components, which have a higher margin.
You also need to look at consumer trends (what people are buying). Smartphone and smartwatch sales are higher than ever, and smart ‘Internet of Things’ devices are growing in popularity rapidly, not to mention in availability.
These devices require a lot of passive components. For example, a typical smartphone requires over 1,000 capacitors. Cars are also huge consumers of passive components, with an electric car requiring around 22,000 MLCCs alone.
The trend for next-generation technology adoption is up across all categories, be it the Internet of Things, edge computing, semi-autonomous cars and 5G. Passive components are in more demand than ever at a time when supplies are under pressure.
Price rises are now inevitable
The price for most passive components has risen by the largest amount in over a decade in 2021, caused by supply and demand economics and a price explosion for common materials like tin, aluminium and copper, as well as rare earth metals.
While some suppliers can afford to take a hit on profits, for most, raising prices is inevitable to ensure the viability of operations.
With higher component prices and greater shortages, it is more important than ever for companies to bolster their supply chains. Complacency is dangerous in today’s market, and no company is immune to disruption.
How to beat the passive components shortage
The passive components shortage is likely to get worse before it gets better, but there are several ways you can bolster your supply chain:
- Equivalents:Specifying equivalent passive components is a sound way to keep your supply chain moving. When a specific passive component isn’t available, an equivalent may be available that functions in exactly the same way.
- Ditch outdated components:Outdated components have limited or no manufacturing output when discontinued. Upgrading to modern components that are manufactured in larger quantities can help you meet demand.
- Partner with a global distributor:Global components distributors like us source and deliver day-to-day, shortage, hard-to-find and obsolete electronic components. We can help keep your supply chain moving in uncertain times. Contact us today SALES@CYCLOPS-ELECTRONICS.COM
10 November 2021
Global silicon chip shortage will last until at least 2023
How long will the global silicon chip shortage last? If you were to ask ten CEO's of leading technology companies, you'd probably get ten different answers.
However, there's one timeframe most CEO's quote…
2023 is the date CEO's are optimistic about
Intel's CEO, Pat Gelsinger, has given us a realistic timeframe for the chip shortage to end - he says the chip shortage won't end until 2023.
"We're in the worst of it now; every quarter next year, we'll get incrementally better, but we're not going to have supply-demand balance until 2023," Gelsinger told CNBC.
Gelsinger's thoughts echo those of Glenn O'Donnell, a vice president research director at advisory firm Forrester, who says the chip shortage will last until 2022.
"Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023," O'Donnell wrote in a blog in March.
Daimler chairman Ola Källenius also believes the chip shortage could last until 2023.
"Several chip suppliers have been referring to structural problems with demand," Källenius told reporters during a roundtable event ahead of the Munich IAA car show. "This could influence 2022 and (the situation) may be more relaxed in 2023."
What will chip demand look like in 2022-2023?
In July, the CEO of STMicroelectronics provided insight into what we can expect in 2022-2023, "Things will improve in 2022 gradually, but we will return to a normal situation ... not before the first half of 2023," he said in an interview.
The global silicon chip shortage has led to car plants shutting down, paused manufacturing lines and delayed product launches. It isn't a short-term problem, and no one knows for sure when supply will start catching up with demand.
All industries and companies that use chips have been affected by the shortage - even Samsung, the world's biggest computer-chip manufacturer, has been affected by it, delaying the launch of several Galaxy and Note smartphones.
Most experts agree that 2022 will echo 2021, with moderate-extreme shortages of integrated circuits and chips, as well as certain active and passive components. Prices are also expected to rise in line with raw material costs.
2023 may be the year that supply starts meeting demand, but it will require the mass opening of foundries and factories. Investment in new plants and manufacturing lines is ongoing, with new fabs set to open in the next two years.
In 2023, we hope to see regular chip inventory levels and average delays of about three months to replenish components. At the moment, some components have delays over a year, and inventory supplies for chips are running low.
Keeping supply chains moving
The best way to keep supply chains moving is to partner with an electronic components distributor like us. We can source chips from around the world, tapping into stockpiles and inventory that isn’t available to the average company.
If you are experiencing an electronic component shortage, we can help. Email us if you have any questions or call us on 01904 415 415 to chat with our team.
03 November 2021
Incoterms (International Commercial Terms) are a set of trade rules issued by the International Chamber of Commerce to define the responsibilities of sellers and buyers globally to reduce confusion in cross-border trade.
Incoterms are 11 internationally recognised rules that define things like who is responsible for managing shipment and who is responsible for customs clearance. The aim is to enable smooth trade and transactions.
This article will provide an explainer of the 11 Incoterms.
Incoterms for Any Mode of Transport
There are seven Incoterms for Any Mode of Transport:
- EXW (Ex Works)- This Incoterm makes export clearance the responsibility of the buyer, except when the country overrules it by law (such as the U.S.).
- FCA (Free Carrier)- The seller is responsible for making the goods available at its own premises or at a named place. The seller is responsible for export clearance and security.
- CPT (Carriage Paid To)- The seller clears goods for transport and delivers them for shipment, assuming responsibility for delivery to the named destination.
- CIP (Carriage and Insurance Paid To)- The seller is responsible for delivery and insurance of delivery, after which risk transfers to the buyer.
- DAP (Delivered at Place)- The seller bears all risks associated with delivery but not unloading.
- DPU (Delivered at Place Unloaded)- The seller bears all risks associated with delivery and unloading.
- DDP (Delivered Duty Paid)- The seller bears all risks associated with customs duty and delivery, as well as unloading.
Incoterms for Sea and Inland Waterway Transport
There are four Incoterms for Sea and Inland Waterway Transport:
- FAS (Free Alongside Ship)- The seller clears goods for export and delivers them for shipment alongside the vessel, after which the buyer assumes responsibility.
- FOB (Free on Board)- The seller clears goods for export and delivers them for shipment on the vessel, after which the buyer assumes responsibility.
- CFR (Cost and Freight)- The seller clears goods for export and assumes responsibility up until the goods are loaded on the vessel.
- CIF (Cost, Insurance and Freight)- The seller clears goods for export and bears the cost of freight and insurance. Buyer assumes responsibility for unloading.
Incoterms are designed to clearly define who is responsible for goods at different points of importation and exportation.
When explicitly incorporated by parties into a sales contract, Incoterms become a legally enforceable part of that sales contract.
In each Incoterm, a statement is provided for the seller’s responsibility to provide goods and a commercial invoice. A corresponding statement stipulates that the buyer pay the price of goods as provided in the contract of sale.
The limitation with Incoterms is they do not address all conditions of a sale, and they do not address liability or dispute resolution. Instead, they are a framework that importers and exporters can use to ensure smooth transactions.
27 October 2021
Why is chip sovereignty so important?
The US and EU are planning for chip sovereignty, aiming to defend domestic chip supplies and move manufacturing back home.
At first glance this is a tall order, considering most chips are made in China and China controls 55% of rare earth metal production, but it is nether the less crucial to ensure that the Western world has access to the chips it needs.
The need for chip sovereignty
As the electronics industry battles on with chip shortages, we are seeing car plants cut production and companies delay product launches.
These are only a few examples of measures applied like sticky plasters over supply chains that have been bleeding for years.
We are in a situation where electronic components manufacturers are running at 99-100% capacity. Demand has soared for all types of components, from chips and memory to diodes and displays, squeezing supply chains.
Quite simply, demand is outstripping supply.
Many of the problems in the supply chain are geopolitical and logistical in nature, so by moving manufacturing back home, nations like the US and the EU will be able to control the supply chain (or most of it) and make supply meet demand.
The EU will legislate to push for chip sovereignty with the forthcoming “European Chips Act”. It aims to stop European countries from competing with each other for chips, instead having them work together to compete globally.
The US isn’t legislating for chip sovereignty, but the Biden administration used its first budget proposal to Congress to call for domestic funding to fight semiconductor shortages, with figures up to $50 billion being touted.
The UK is at odds with the US and EU with no chip sovereignty in sight.
Simply put, the UK is selling off chip firms, with $42 billion sold since 2010 (figures from US research). For example, In July, the UK’s largest chip plant was acquired by Nexperia - a Dutch firm wholly owned by Shanghai-based Wingtech.
This raises concerns over the future of UK chip manufacturing. Industry funding is seriously lacking too, putting the UK firmly behind the US and EU.
Companies are a successful case study
As countries continue to struggle to meet demand for chips, some companies have taken matters into their own hands.
Apple produces their own chip called the M1 for the MacBook Air and iMac, and Google is doing the same with the Tensor chip, used in the Pixel 6 smartphone.
By moving away from Intel and Qualcomm respectively, Apple and Google have taken greater control over their supply chains, cutting out many geopolitical and logistical issues and unlocking greater pricing power.
With the global chip shortage showing no signs of abating and rare earth metal prices soaring, supply chains are only going to get squeezed more in the near future.
Chip sovereignty will be important for nations to meet demand and reduce reliance on China, Taiwan, and other countries a very long way away.
However, while the EU legislates for chip sovereignty, and the Biden administration pushes Congress for domestic chip funding, the UK continues to sell off chip firms to foreign investors. This will bite down hard when chip imports take a hit.
Enter Electronic Component part number below.