Over the last 18 months the electronic component industry has been significantly impacted by unprecedented cost increases throughout its supply chain — raw materials, smelters, foundries, test and assembly, logistics and labour. Price increases have been passed on to customers to cover inflationary pressures, rising material costs and production cost increases. This change follows 10 years of very low interest rates and consequential stable low component pricing.
Foundries increased their pricing 10-20%, chemicals used in manufacturing increased 10-20% and the price of raw materials across the board has increased. Labour costs have gone up, not just with inflation-matching pay rises but also due to labour shortages from COVID-19 quarantine restrictions that have been in place across parts of Asia, including the central component manufacturing hubs in Shanghai.
Continued Efforts
Despite best efforts, the challenges facing the supply chain have developed even further than expected in the second half of this year. We are in a situation where many electronic components manufacturers are running at 95-100% capacity and can’t keep up with demand, meaning demand is outstripping supply by some margin for memory and communications components like integrated circuits, discrete circuits, optoelectronics, and sensors. This is impacting lead time as well as cost. While things are starting to stabilise, Commodity IQ data indicates that shortages will last well into the second half of 2023.
Upward Trend
As of today, the upward trend in prices continues and lead times remain at high levels. This applies to all commodities, especially electronic components. There is no observable downward trend in prices and lead times and no clear perspective of improvement is visible.
Price Increases
We are expecting to see price increases from a number of our partners over Q4 2022. While we’re monitoring the situation closely, we’re asking customers to help us to manage their future requirements and avoid lead time issues by reviewing their forecast and placing purchase orders as far in advance as possible. Scheduled deliveries, stock holding and budgetary invoicing are all available to help you manage your own supply chain.
Mitigation and Support
By letting us know what you think you’re going to need over the next 12 months, or even better placing a scheduled order for requirements out to 2023, we can support your projects more efficiently by mitigating against the extensive lead times and increasing costs, as well as protecting your schedule.
Please let us know how we can help you by
getting in touch to discuss your requirements.
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