The imbalance between supply and demand in the E​lectronic supply chain​

The imbalance between supply and demand in the E​lectronic supply chain​

Halfway into 2017, there are no signs of improvement for the ongoing electronic component shortages and extensive lead time issues within the global electronics industry. Some industry experts are concerned this year’s imbalance of demand and supply could be as severe as the year 2000. With all the computer-based inventory management programs and data-centric supply chain strategies, how the imbalance between demand and supply could be this server?

Uncertainties in Global Economic and Political Environment

From Brexit to Trump winning the U.S. presidential election, there were several “black swan” events in 2016. Those events were highly unexpected and carried large consequences. The uncertainty in economic and political environment pushes semiconductor manufacturers to the conservative side when making decisions on capacity planning and production expansion. Moreover, years of capital expenditure reductions have cut the number of manufacture facilities that can respond to unanticipated demand surge in the market. Additionally, the uncertain macro-economic environment could likely impact consumer confidence. As a result, it is unknown when the demand of electronic components could decline.

Product Updates is Faster than Ever

The speed of electronic product updates is unprecedented. Consumers used to get a new iPhone once a year, now they are faced with new products from various brands every month. Each one of the new electronic gadgets comes with more advanced hardware features than the previous generations to grab consumers’ interest. For example, smart phones with two camera lenses are becoming a common feature in the market and 64 GB memory is now the default minimum storage for many smart phones. The increasing demand in end products is pushing demand high in the components market, especially within lenses and memory.

Between ODMs and OEMs, the competition to obtain enough memory components for their product line is fierce across the entire industry. The unstable yield due to changing process from 2D NAND Flash to 3D NAND Flash adds more tension to the market.

Thanks to the growing interests and demand for IoT devices, the market is seeing serious shortage in passive components. Although those passive components are low in price, their demand is usually in millions. Almost all IoT devices will need to have some passive components as essential elements in their BOM (bill of material). The exponential growth in demand for passive components is extending the lead time and putting pressure on the chip manufacturers.

Shortage in Raw Materials

Another notable trend in the market is the shortage of raw materials, such as silicon wafers, to produce ICs. It is reported that major wafer suppliers, such as Shin-Etsu Chemical, Sumco and Siltronic, had informed their customers that there will be an under-supply of 12-inch wafers. Mergers and acquisitions in the wafer industry also played a role in the tight supply. And more acquisition activitiesare expected within the wafer industry. With limited supply in raw materials, it is possible to see more component shortages in the future.

With 39 years of experience in the electronic component industry, Advanced MP Technology has a proven track record in supporting OEMs, ODMs and EMS during server component shortage times like today. Advanced MP Technology is well-suited and proven to support our customers during any market condition through our knowledgeable sourcing teams, multimillion dollar inventory, dynamic global connections in the industry and the ability to monitor global markets in real time. Contact our shortage mitigation specialists to solve your problems today.