Component shortage - an evaluation of the situation
The component shortage takes control of most processes in the electronics industry. As Head of Strategic Purchasing at EMS service provider A+B Electronic, Marcus Hartwig has to deal with the subject on a daily basis. “To say the time is about to run out, that would have been right six months ago. It is high time.”
He gives an overview of the situation and shows what companies can do now that rely on assembled printed circuit boards. The lack of the smallest electronic components is already causing a standstill for large manufacturers in the automotive industry. If the big customers in the industry feel that way, then you can imagine what's going on in the market itself. Because if the supply can’t be ensured even there, everyone knows that the hour has struck. There are always ups and downs in the EMS industry, regardless of whether it is about demand or supply. Marcus Hartwig has been with A+B Electronic for 20 years and has already experienced a few crises. However, he has not yet gone through a crisis like the current one with active components. Manufacturers' delivery times are skyrocketing, as are prices. If you get a delivery date of almost 70 weeks, the planning is already at the end of 2022. Allocations also only bring small partial quantities into production. “The market is going crazy, there is no other way of saying it. To describe the situation as it is at the moment. I think we can speak of the biggest crisis in this industry”, summarises Marcus Hartwig from A+B Electronic. What are the problems and reasons for the shortage? But according to him, the shortage cannot be blamed solely on the current pandemic. It acts as a kind of fire accelerator, but the crisis is rather the sum of many unfortunate pieces of one puzzle. Transport routes are made more difficult by the lack of air traffic, and the industry is struggling with enormous price roses for components. Growing segments such as e-mobility, entertainment electronics or 5G are making demands on many technical components, while supply does not increase to the same extent as demand. And these are just a few problems in the current situation. As a strategic buyer, Marcus Hartwig also sees difficult situations with customers: “There is a lack of understanding for the rising prices and the long delivery times. Of course, you can still implement orders at short notice in individual cases, but in these cases the suppliers can be paid princely." Even with a realistic view, the problem cannot be remedied in a short term. Rather, it will accompany the electronics industry well into 2022. Many technical areas that were forced to sleep during the pandemic will have a lot of catching up to do. The situation cannot relax quickly. How should customers of EMS providers act now? So how do you react as a company that is absolutely dependent on EMS services? The profession buyer from A+B Electronic has a answer here: “From my point of view, the only way is to order as early as possible. Customers should cover all their needs, better today than tomorrow. So really everything that is visible and justifiable from the customer's point of view. You have to accept the rising prices. At this point it's all about minimising the risk. For us, the most important thing is that our customers receive their assemblies and thus can also sell their own products." The situation is difficult for many companies. You have already been shaken by the Corona crisis and hesitate to make advance payments for 1-2 years if the sale of your own products is not yet foreseeable. But it is also clear that customers who do not take action now will have to survive long dry spells. It's a risk assessment: Can my company handle it or should I order long-term in order to proactively counter the problems? Proactive behaviour also helps EMS service providers such as A+B Electronic in planning and production. Requirements can be registered at an early stage and changes can be addressed directly with the customer developers. What alternatives are there for the components? How can problems be addressed? This should be clarified if possible before the first vacancies occur. Marcus Hartwig closes with positive words: “We won't leave anyone out in the rain, because after all we are together in a crisis. We can only get out of there together as well."