The Electronics Supply Chain: Preparing for an Eventful Year Ahead

The Electronics Supply Chain: Preparing for an Eventful Year Ahead

Entering the last month of Q1 2019, many procurement and supply chain professionals may have discovered 2019 could be another eventful year after the 2018 shortage. The rebalance of inventory, oversupply and undersupply, and the trade war have impacted the global electronics industry from a variety of angles. Everyone in the supply chain will have to face challenges in the coming months.

After a component shortage cycle, the supply chain will typically go through a period of inventory balance to absorb excess products through different channels. Recently, several media channels reported that Renesas plans to “temporarily halt production in accordance with demand moving forward” for 2 months. Renesas also pointed out “the fluctuating semiconductor demand caused by the potential impact of market uncertainties in the current fiscal year” is the primary reason behind the temporary shutdown. Additionally, it is reported that the leading Taiwan-based MLCC supplier Yageo has been only utilizing 30% of its production capacity in recent months.

For OCMs, halting production will temporarily help to control inventory levels and improve the bottom line. However, it is never easy to predict the accurate demand in today’s complex and dynamic electronics supply chain. When the demand rises from production lines, a shortage or stretched lead times may come sooner than anticipated. It is beneficial for procurement professionals to stay in close connection with well-experienced supply chain partners, such as global distributor Advanced MP Technology who has over 40 years of distribution experience. This collaboration will allow for proactive monitoring of the situation and a timely collection of relevant information. With this, supply chain partners can provide quick reaction and execution when sourcing critical components.

While there is still a shortage for some components in the market, such as MLCCs in certain sizes, other components are facing an issue of oversupply. Weak demand from the end market and expanded supply of NAND flash created an oversupply in 2H18. The situation is likely to continue throughout 1H19. In this complex market, mitigating shortages while taking advantage of price decreases in alternate components are challenging yet rewarding tasks for commodity managers. Working with a full-service supply chain solutions provider, such as Advanced MP Technology, who has access to the global markets, will help commodity managers source hard-to-find components promptly.

Lastly, uncertainty in the global economic and political environment is putting a significant strain on the semiconductor industry. According to the World Semiconductor Trade Statistics, global semiconductor sales in January declined 5.7% year-over-year to $35.5 billion, marking the first decline in 30 months. Weak demand from American tech giants such as Google, Apple, Facebook and (GAFA), along with economic slowdown in China, are the main causes of this constriction in the semiconductor market. In the summer of 2018, GAFA started to slow down their investment in data centers, which caused a decrease in server memory chip demand. The slowdown in China’s automobile and factory automation has caused nearly a 20% crash in chip sales in China between November 2018 and January 2019.

When facing a complex global supply chain with unclear visibility and several imposing factors, having a trustworthy and capable supply chain partner is proven to be extremely helpful for buyers and commodity managers. With over 40 years of experience in the industry, along with a solid global network and robust business intelligence tools, Advanced MP Technology will help overcome daily challenges utilizing our customizable solutions; including shortage mitigation, cost reduction, EOL sourcing, LTB strategy and much more.