Navigating the Component Shortage2018/08/24 Up Teks Co., Ltd.
The only abundance seen lately in the electronic components market is the quantity of calendar pages marking how long the supply shortage has lasted. Now entering its second year, the shortage has no clear end in sight, as the market continues to navigate a perfect storm of high demand and short supply for electronic products.
At first glance, the constraints on this market would appear to be tied to recent headlines in the media about advances toward autonomous or connected vehicles, smart packaging, networked medical devices, and the latest smartphones. All of these headline trends are indeed having an influence on demand. However, the connection is not as direct as it would seem, and OEMs will benefit from a better understanding of the forces at play.
The shortages felt most keenly are for passive components, especially standard fare such as multilayer ceramic capacitors (MLCC), resistors, transistors, diodes, and even memory. Demand has not abated for the legacy components within these commodities and, in parallel to this, we continue to see suppliers turning their attention (and capacity) toward more lucrative opportunities emerging in automotive, industrial, smartphones and the Internet of Things (IoT).
The market for IoT components, though comparatively smaller than those for automotive or smartphones, actually encompasses and overlaps several markets – including automotive connectivity, medical smart devices and active packaging. The IoT segment is on track for explosive future growth, however. Gartner predicts the market for IoT electronics to grow by more than 100 percent to encompass over 20 billion devices within just two years, as sensors and connectivity are embedded in household appliances, packaging, medical devices, industrial equipment and dozens of other current analog products.
Looking beyond connected automobiles, the overall transportation sector currently constitutes a larger market than IoT that is also on track for fast growth. Today’s conventional fuel-powered cars might carry 2,000 to 3,000 capacitors, though they are slowly ceding market share to electric vehicles that have up to 22,000 MLCCs onboard. As if this were not enough to get component suppliers’ attention, the automotive market also accepts higher price-points for electronics, and its relative stability makes it a lower risk bet on which to focus capacity.
Neither the IoT nor automotive markets can match the influence of smartphone manufacturers, however. Collectively, our current and future mobile devices still represent the most significant source of demand for passive components and memory products. Approximately 1.5 billion smartphones – each containing roughly 1,000 capacitors – are manufactured each year, which translates as a trillion and a half MLCCs or roughly half the total global output for these devices. Market saturation for mobile phones will not slow this demand, as the trend toward miniaturized components continues to drive up their density in future models.
What can OEMs do?These trends are better news for suppliers than OEMs, especially OEMs who are slow to update their product designs to align with the more advanced components that suppliers wish to sell. The recovery, when it comes, will appear first among the electronics products that represent attractive investments to suppliers. Consequently, OEMs that evolve their product design to keep pace with suppliers’ technology roadmaps will position themselves to take advantage of this earlier recovery.
OEMs can also blunt the impact of component shortages by dedicating more time to building relationships in and beyond their supply network. In a climate like this, the name of the game for suppliers is allocation, wherein they allocate a percentage of their output to each customer. That means OEMs may only get a percentage of the demand they have for a specific product. Thus, it’s critical to cultivate stronger and broader supplier relationships, and to minimize their reliance on single-sourced parts.
It is important to remember this too shall pass, though that is not an appeal to complacence. The decisions you make right now may affect your company’s longevity. These types of supply shortages weed out vulnerable businesses and, though your competitors are likely struggling to meet their production goals as well, the current crisis can represent an opportunity for OEMs who understand and correctly respond to the changing market.
News content originated from：http://www.embedded-computing.com/iot/navigating-the-component-shortage