The continuing shortage of electronic components continues to disrupt businesses across the economy. Combined with other current supply chain crises, such as growing port congestion and a shortage of truck drivers, the shortage has made manufacturing electronic devices much more of a challenge.
For companies facing shortages, these strategies may be the most effective to implement until the market is able to deliver more normal levels of supply.
The current state of the shortage of electronic components
A number of major component types face shortcomings right now.
Most important is the semiconductor shortage, caused by a combination of persistent Covid-related production outages in East Asia, limited availability of critical semiconductor materials, and growing demand for electronic devices.
Semiconductor demand grew more than 30% between August 2020 and August 2021, despite slower-than-usual economic growth.
The expansion of the IoT market, the development of technologies such as IoT semiconductors, and the rollout of 5G have likely helped drive this increase in demand.
Other essential components and raw materials are also in short supply, making manufacturing difficult even when companies can source the semiconductors or semiconductor-dependent parts they need.
The availability of key power and passive components such as multilayer ceramic capacitors (MLCCs), diodes, transistors and resistors has also been impacted by the pandemic and current supply chain challenges. Like semiconductors, these components can be difficult to find.
When will the shortage end?
Experts aren’t entirely sure how long any of these component shortages will last. However, many have predicted that manufacturers will see some relief in 2022.
Yole Développement economist Guillaume Assogba, for example, told Windows Central he expects the shortage to end by the end of 2022. Assogba predicts that consumer technology makers will recover first thanks to stronger links between that sector. and the electronic components industry.
Industries that didn’t work as hard to maintain links with electronic component manufacturers during the pandemic, such as the automotive industry, may not recover until early 2023.
In any case, companies should expect the shortage of electronics and components to last until 2022.
What companies can do right now to adapt
Companies are adopting innovative strategies to address current shortcomings.
Some of these strategies affect all sectors and industry niches. For example, all companies can benefit from developing stronger relationships with component suppliers.
Building partnerships with suppliers
These regular reports and communications may mean that suppliers will provide the latest update on market conditions, advance notice of parts availability and potentially advice on how to address future shortages.
Companies that maintain their supplier relationships will likely have time to recover more easily when the shortage ends. Many chip vendors also offer preferred customer programs and similar initiatives that prioritize customers if they engage in long-term business relationships.
If a company can afford to enter into a contract of six months or more, it may be able to secure a supply of essential components in the future as well.
Building resilience in the company’s supply chain can also help the company prepare for future crises. Diversifying suppliers, expanding storage capacities for essential components, and investing in risk management can help a brand protect itself from potential future supply chain shocks.
In any case, companies should avoid gray market suppliers and unofficial suppliers when trying to manage current shortages or diversify their supplier base. The quality and reliability of these suppliers and resellers may be inferior to more legitimate suppliers, downsides that may outweigh the benefits of working with gray market suppliers, even when they can supply chips when other manufacturers can’t.
Changes to production processes and product design
Businesses may also need more immediate solutions to manufacturing and supply chain problems. Temporary chip replacement, for example, may be necessary for companies unable to source the desired chips.
Replacing the current chips with chips that have more or less memory than the current solution is a viable option. Budget changes may be required for larger chips, while smaller chips may only be usable with new firmware that requires less memory.
Designing for shortages may be the only short-term solution to certain product availability problems, particularly for industries that may not find relief until early 2023.
Preparing new projects for future shortages can also help the company prepare for future crises. Open designs that can be easily reconfigured based on component availability can help keep production flexible, allowing the company to move quickly in case shortages make it impossible to find a preferred chip or component.
Planning can help companies overcome the shortage of electronic components
Experts predict that the shortage of electronic components could last into 2022, and potentially beyond for industries that have not maintained strong supplier relationships.
Until then, components such as semiconductors, transistors and resistors, along with essential raw materials, may remain in short supply.
The right planning can help companies overcome the crisis and prepare for future supply chain shocks. Stronger partnerships with suppliers, a diverse supply base, and flexible designs can make this shortage more manageable.