Showing posts for July 2021
28 July 2021
What Shortage? How Electronic Component Distributors Make Supply Meet Demand
When buyers can’t find electronic components, they turn to distributors like us who can source scarce and obsolete parts.
Our experience has been tested to new extremes over the last several months due to the semiconductor and wider electronic components shortage. This shortage was years in the making but has been amplified by COVID-19.
It says everything about the state of the electronic components supply chain when Samsung, who make their own chips, don’t have enough chips. Shortages have affected brands like Samsung, Apple, Volkswagen and Nintendo not just in terms of supply, but also prices, which have skyrocketed in 12 months.
When the chips are down, prices go up.
Distributors are busier than ever
Cyclops Electronics, as well other distributors, have become more essential than ever in supply chains since the COVID-19 pandemic began.
It’s no exaggeration to say distributors like us are keeping many businesses going. We keep production lines going by sourcing scarce parts from around the world - parts that would be impossible to source without excellent connections.
We are seeing desperation from companies that have never experienced supply chain problems. We’re talking about global companies listed publicly.
The situation is so bad for some components that some companies are paying a 100% premium just to secure them. Supply and demand is driving fierce competition and bidding wars are not uncommon.
If these revelations shock you, consider this - the electronics components shortage isn’t expected to abate until late 2021 at least. By then, there should be more order to the chaos, but some industry experts expect it to persist longer.
For example, IBM has said the chip shortage could last 2 years.
A 2 year extension would extend the chip shortage to 2023 at least. This is likely to be the case for other components too, including memory, integrated circuits and display drivers. A huge number of companies will be affected.
Playing a crucial role in the supply chain
Distributors like us are able to source hard-to-procure components because we have rapport with the best suppliers in the industry. In other words, we have immense buying power, and we put this to use for our customers.
Another way we are playing a crucial role in the electronics components supply chain is the reduction of counterfeit components.
Counterfeiters are taking advantage of weakened supply chains, lapse quality control processes and inadequate reporting to flood the market with illegal components. This has affected thousands of buyers and will affect many more.
Our role in this is to deploy anti-counterfeiting technologies including a SENTRY machine, die testing and decapsulation testing to test the components we procure. This ensures the components we supply are genuine parts.
We provide industry-leading chip testing to catch counterfeit parts. We have ISO 9001:2015 certification and ESD qualified staff.
If you need to buy parts and the only way to get them is with a distributor, don’t rush in - make sure your distributor is as equally qualified as us first. If you need help, feel free to call us on 01904 415 415 for a chat with our experts.
21 July 2021
Perfect storm' creates electronic component shortages
A perfect storm has hit the electronic components market, creating supply chain problems that will be felt for several years.
The perfect storm
Even before the COVID-19 pandemic, most electronic component manufacturers were running at 95-98% capacity.
This high demand for electronic components was fuelled by growth in technologies like automation and the Internet of Things - technologies that are only in their infancy now but will mature in the next decade.
This high manufacturing output was felt across all types of components, especially chips (semiconductors, memory) and integrated circuits. It was even difficult to get a hold of some active and passive components in 2019.
Then, in 2020, the COVID-19 pandemic hit. Car manufacturers and other manufacturers affected by shutdowns paused orders for electronic components. Meanwhile, manufacturers benefitting from lockdowns scaled up.
Now, with the development and roll-out of COVID-19 vaccines, industries that shut down have opened up again. But there’s a problem - demand for electronics has not wavered and there isn’t enough manufacturing capacity to serve everyone.
Quite simply, there isn’t enough bread to go around.
Demand is ramping up
We are now 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. This is squeezing most supply chains.
There are so many contributors to this squeeze. Emerging technologies like AI, automation, virtual reality, augmented reality and machine learning are fuelling demand for smarter chips and data centre modernisation, while technologies like 5G and Wi-Fi 6 are demanding infrastructure rollout, which requires a significant effort.
When it comes to chips, however, cars are the biggest users. Cars can have as many as 22,000 multilayer ceramic capacitors (MLCCs) each. This will increase as cars get smarter (a self-driving taxi sounds great, but it’ll need around 30,000 chips).
Suppliers are slowly adapting
There have been years of under-investment in new foundries and plants. This under-investment has affected manufacturing capacity today.
To their credit, most manufacturers are looking to expand capacity by setting up new foundries or acquiring plants. Trouble is that most plants take years to set up. Some plants that started a build-in in 2017 are still being built.
Staffing is also an issue. The biggest challenge suppliers face is social distancing and COVID prevention policies, which have reduced staff numbers in many factories.
You can’t automate every process in a factory, so it is a given that having limited staff will increase lead times. Some manufacturers have been harder hit than others with this, but all will experience staff shortages during the pandemic.
In addition to this, freight has become more challenging during the pandemic. Things are taking longer to move and there are fewer commercial flights. Global shipping rates have skyrocketed during the pandemic because of this. Higher shipping rates have contributed to price increases for most electronic components.
Weathering the storm
We predicted the electronics component shortage in early 2020 following the UK Government’s national lockdown. We knew supply chains would be squeezed and stretched due to changes in economic output and industry trends.
The best way to weather the storm is to work with us or another reputable electronic components distributor. We focus on delivering outstanding service, with industry-leading quality and dependability. Call us on 01904 415 415 for a chat.
14 July 2021
Active Electronic Components Market Growing Demand
Active electronic component demand is soaring. The market is expected to grow by a compound annual growth rate of 4.8% during 2021-2026, fuelled by new technologies and faster and more globally available internet connectivity.
What’s driving it?
An explosion of new products with AI and IoT support and tailwinds like 5G are fuelling demand for active components.
Semiconductor devices, optoelectronic devices, and display technologies are significant applications. Examples include smart home appliances, virtual reality headsets, connected medical devices, and electronic ordering systems.
Here’s a non-exhaustive list of active components in high demand:
- Integrated circuits
- Digital and analogue circuits
- Batteries and power supplies
- Vacuum tubes
- CRT / LCD / VFD / TFT / LED displays
The increasing trends of the Internet of Things (IoT), automation, artificial intelligence, machine learning and virtual/augmented reality are expected to fuel demand for active electronic components for years to come.
Challenges lie ahead
This growing demand is not without its challenges. How will manufacturers get a hold of active electronic components if there isn’t enough to go around? Will geopolitical tensions affect supply? How will COVID-19 play a role in the future?
COVID-19 can create supply chain and market disruption and have a financial impact on firms and financial markets. If the virus persists in causing global disruption, this is likely to cause a shortage of active components in the future.
The US and China’s trade war in 2020 affected chip supplies around the world. Geopolitical tensions remain a risk in the future. Who knows if certain brands will be banned? It’s important that manufacturers stay in the loop to avoid supply chain problems.
The world is advancing at a rapid rate and electronics components manufacturers are struggling to keep up. While investment in new factories is ongoing, demand may exceed manufacturing capacity, causing a shortage of components.
Inflation is making everything more expensive. Add wildly fluctuating exchange rates and increasing demand for active components and you have the perfect recipe for price increases. This could cause a bidding war.
Active components and the future
The future is filled with more technology than you can imagine. Everything will be connected, including your car to your smartphone and your TV speakers to your smart home assistant (e.g. Alexa). Anything electronic can have a chip these days and you can bet innovators will find a way to make everything smart and connected.
With the active electronic components market predicted to increase in value significantly over the next five years, it is essential that companies have a reliable way to source the active components they need.
This is not a matter of beating the competition but a matter of staying operational amid impending shortages. The current chip shortage is a prime example of what can happen if a perfect storm of industry issues occurs.
If you need to source active electronic components, we can help. Email us if you have any questions or call us on 01904 415 415 for a chat with our team.
07 July 2021
The Global Chip Shortage Has Created a New Problem: Counterfeits
The global chip shortage is officially wreaking havoc.
The world's biggest carmakers, including Toyota and Volkswagen, have had to slow down vehicle production, and Samsung - who make their own chips - has had to delay the launch of several smartphones due to be released in 2021.
These are but a few examples of thousands of cases where the global chip shortage is wreaking havoc with manufacturers.
But that’s not all - the global chip shortage is creating a new problem: counterfeit components.
The issue is simple: chip manufacturers can’t make enough chips which has given counterfeiters a golden opportunity to plug the gap.
A counterfeit part is an unauthorised copy, imitation, substitute, or modification of an original component.
Counterfeit components are illegal and should not be used under any circumstances, but counterfeiters don’t care. They defraud you and hope you don’t notice. And if you do, there is virtually no chance of getting your money back.
With no accountability, counterfeiters are having a field day.
A sophisticated criminal enterprise
The counterfeit electronic components industry is a multi-million pound industry. It has become sophisticated and impossible to shut down.
Criminals are taking advantage of weakened supply chains, inadequate quality control processes and inadequate reporting to flood the market with illegal components. They are praying on weaknesses and desperation to profit.
Counterfeit chips can look like the real thing, but worse still is they can also perform similarly during basic benchmarks and tests. This allows the most sophisticated components to penetrate manufacturing lines.
The risks of using counterfeit components include:
- Financial loss
- Reputational damage
- Loss of customers
- Refunds and regulatory fines
- Bribery from criminals
- Poor and dangerous product performance
How we can help you avoid counterfeits
We provide industry-leading chip testing to catch counterfeit goods. We have ISO 9001:2015 certification and ESD qualified staff. We have several anti-counterfeiting technologies available including a SENTRY machine, die testing and decapsulation testing.
We specialise in the procurement and delivery of electronic components for a wide variety of industries from the world's leading manufacturers.
If you work with us as your electronic components distributor, you can avoid the issue of counterfeit chips and components for good. We have standard anti-counterfeiting policies and all the components we supply have a guarantee.
If you are still exploring your options, here’s some general advice:
- If it is too good to be true, it probably is
- Make sure any guarantee is worth the paper it is printed on
- Look for ISO 9001:2015 certification
- Demand testing prior to all deliveries
- Only work with suppliers who have an anti-counterfeiting policy
- Beware of spoof companies that pretend to be someone they are not
- Consider staff training to identify when something isn’t right with suppliers
If you are concerned about counterfeit components in your supply chain we are happy to provide advice. Call us on 01904 415 415 for a chat with our experts. The chip shortage does not have to affect your supply chain with our help.
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