Global Chips Shortages and Supply Impact
Semiconductor chips are known as essential components in every electronic product. Whether connecting to every corner of the world or changing how we live and work, the achievement of chips outcast any other technology and became the building blocks of modernization.
With the global semiconductor supply chain being put under enormous pressure by the Covid-19 pandemic, the severity and impact of chip shortage has gone up.
Chip shortage typically occurs when there is change that prevents certain chips from being produced in large quantities needed to satisfy demand. This can have a major impact on the electronics industry where manufacturers can suffer major loss of profits. They can either change their sourcing of chips, allow alternative chips, or redesign their products.
Reason for Global Chips Shortages
Demand rebound for Automotive Market
The crisis from the spread of Covid-19 pandemic forced many giants of the automaker industry to either temporarily shut down or scale down production lines. Some of these automakers are General Motors, Ford, Volkswagen, Toyota, and Nissan.
Adding to the situation caused by the pandemic, two events also impair the situation for shortage of auto semiconductor chips.
- Fire at the chip-making factory of Renesas Electronics Corp (covers 30% of the global market for microcontroller units used in cars)
- Severe winter weather conditions in Texas that forced major automotive chip suppliers such as Samsung Electronics Co Ltd, NXP Semiconductors and Infineon to shut down factories temporarily.
With the situation getting worse, car sales bounced back faster than the expectation and the chip factories could not respond fast enough to the demand of automakers due to long lead times needed to schedule orders.
Driven by 5G and Advanced Technology
There is a high demand expectation for mobile chips as the industry enters 2020. This is due to the rollout of 5G devices and technology advancement. The increase in semiconductor chips demand for the internet of things (IOT) and artificial intelligence are also expected.
Surge in Demand for Consumer Electronics
Because of the lockdowns and “stay at home” effect of Covid-19 pandemic, consumer electronics such as laptops, phones, tablets, appliances and gaming consoles have been in a high demand. It’s been a big win for the semiconductor industry but consumer electronics manufacturers found themselves getting slammed by chip shortages unable to secure sufficient supplies to meet the increase in demand.
Ascension in Cryptocurrency Mining
Semiconductor chips are used in a variety of computational hardware such as the core logic and memory parts. An example of which is cryptocurrency mining that relies heavily on semiconductor supply. The crypto bull run that started autumn 2020 has caused an increase of interest for acquiring hardware for mining crypto currencies.
Impact from Chips and Components Shortages
Stretching lead time
There are supplier delivery delays or increase in lead time experienced in many chips for programmable logic, microcontrollers, network interface cards, and serial I/O controllers. This also includes automotive chips that have risen the lead time for about 2-3 times or more in some cases, depending on the component.
Rising raw material costs
The price of raw materials is continuously increasing and manufacturers are facing many challenges through the supply chains. The current price of chips has risen by more than 20% and the industry believes that these prices will grow to more than 30% by 2021. Some of which like CMOS chips, have already risen to nearly 40%.
Increase in logistic/freight cost
The global transportation system has also encountered constraints. Companies have to pay premiums for shipping due to shortages of shipping containers. Because of this, the demand drove towards airfreight but the system has been experiencing higher demand due to global shipments of the Covid-19 vaccine. The capacity has also been reduced due to the pandemic which has meant that there are fewer passenger planes available to carry freight.
What Gennex Group can offer in this tight situation?
The pandemic and the chip shortage have clearly pronounced the need of a flexible, agile supply chain which is vital to navigating the changes and staying resilient. This is where Gennex Group can support you and showcasing full capabilities to overcome this situation.
Gennex is a fast-growing distributor of not only the current most in-demand semiconductor chips but also other electronic components, hardware supplies, semiconductor test and equipment, and test consumables. We are also evolving with equipped capability to customize services and solutions based on our customers’ needs.
With the pandemic affecting the current global chip supply and demand, more and more companies are needing support to overcome this critical level and awareness for ramp-up production lines. As the key strategic point to this sudden changes, Gennex Group offers:
Multi-brands sourcing ( Franchised and Non-Franchised lines)
Due to chip shortage, multi-brand sourcing will be a key source to be very resilient in this kind of situation. There will be more flexibility to cope for unexpected events due to capacity and availability. Gennex Group will give you this advantage and will help you to intelligently choose between alternate sources of supply from reputable and well-known manufacturers worldwide.
Regional sites support with dedicated Sales and CS Team
Gennex has warehouses strategically located in Singapore, Philippines, Hong Kong and Taiwan allowing us fast and cost efficient deliveries to customers. We also have wide coverage sourcing capability for lead time and spot-buy requirements because we are equipped with a fully inter-linked web-based ERP system, Hub / JIT program to fully support dynamic production requirements, and VMI / SMI program with global OEM.
FAEs to assist in alternate component design support
With our evolving capability, we are able to provide design solutions including customer design support for modifications and alternate component solutions. We have focused and experienced product managers and application engineers to provide the best solution to customer needs.
Customers are able to sign up for our component inventory offering for up-to-date info.
Gennex provides support for your stock control by showing you our component inventory offerings and keeping you on track of it real-time. This will help you have superior materials planning and procurement strategies.
To know more about the details of this feature and answer your inquiries, kindly contact us here.
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With our proven and trusted capabilities, Gennex will be working in close coordination with our suppliers to be able to get you up-to-date on new product development and market trends.
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