The Current Electronic Component Landscape 

In Nearshoring Electronics Manufacturing: Shifting Global Value Chains, MacroFab states that disruptions frequently reveal vulnerabilities. The past several years have proven this correct. These vulnerabilities supported the idea that "industries with the highest trade intensity and concentration of exports in a few places are more vulnerable than others."

Most businesses working with chips, control boards, electric batteries, and electrical parts depend on exports from only four countries — China, Taiwan, South Korea, and Japan, According to MacroFab. Asia has held most of the chips for some time now.  It accounts for more than 70% of semiconductor exports. 

Nearshoring, onshoring, and reshoring have grown as a response to this single-source dependency. Nearshoring and its synonymous counterparts will help companies mitigate risk by bringing manufacturing closer to the customer base and injecting much-needed flexibility. This will help fulfill consumer needs faster, reduce transit times, and decrease exposure to the challenges of the past. 

Keeping Up with Market Trends 

Monitoring the nearshoring movement is crucial to navigating the changing cycles of supply and demand. Meeting demand will require a deep knowledge of the supply chain. Maersk surveyed global technology retailers and manufacturers and found that 67% of companies have moved their material and component sourcing closer to key markets. 

"The numerous supply chain disruptions over the past two years have highlighted the fragility of offshoring—a business operations model introduced in the 1960s where manufacturing was outsourced to Asia," Fusion Worldwide explains in the 2022 article Nearshoring, a Strategic Response to the Current Supply Chain Model. The article discusses how more organizations are transferring options back to nearby countries (versus offshoring activities to far-off countries). 

"One year later, we're seeing more movement on the nearshoring front as companies have begun the expansion announced in 2021 and 2022," Fusion Worldwide points out. "The challenges we highlighted around it being a costly and lengthy process have remained, but there have been added challenges associated with finding the talent to staff these facilities." 

Fusion also finds that, despite the benefits of offshoring, the added challenge of trade wars, extreme weather events, and limited geographic distribution in manufacturing have pushed manufacturers to embrace the possibility of nearshoring.

Tips for Electronic Component Supply Chain Success 

Nearshoring will change how the supply chain operates. This may cause a ripple effect, impacting lead times and pricing as new facilities come online and partnerships adjust.  

Many of these facilities are already underway, with companies like TSMC expanding into the US and preparing to deliver volume production of its latest process technology -- as early as 2025. The company has also announced a specialty technology fab in Germany, specifically supporting automotive and industrial applications. Construction will begin in 2024, with production starting in late 2027.

If companies aren’t proactively planning around what this new supply chain might look like, they could lose out on valuable opportunities to inject resiliency into their business models,” cautions Fusion Worldwide.

To prepare for all possibilities, plan around the locations manufacturers are expanding into and engage with global sourcing partners. Build relationships with distributors that offer a global presence. This should ensure that personnel are experienced and can support your business on a more holistic level. Independent distributors like Fusion Worldwide, for example, have worldwide connections and capabilities that help their customers better manage their electronics supply chains. 

Nearshoring can help companies build a resilient technology supply chain that keeps them ahead of the game even in the face of constant disruptions. We advocate for a diverse supply chain by including a distributor with suppliers in your region. In most cases, these are the most resilient supply chains because they allow companies to draw on multiple resources in the event of one strategic partner being unable to support sourcing needs. 

Planning for the Future of the Supply Chain 

Changing material and component sourcing locations is a considerable investment of both time and capital. As numerous countries redistribute their supply chains, it’s important to keep track of how these new hubs for the industry change the market landscape. India, for example, is vying to become a player in the semiconductor industry. They began construction on their first semiconductor fab earlier this year. To learn more about what it will take to turn India into the next production powerhouse, click here. 

About Fusion Worldwide 

Preparedness starts with understanding the current landscape. As the preeminent global distributor of electronic components and products, Fusion Worldwide knows how to navigate the market no matter its conditions. We source, inspect, test, and deliver a broad range of components to a large and diversified customer base that includes OEMs, CEMs, and ODMs across a wide array of verticals. Contact us today to learn how we can activate our global network to keep you out in front and get you the parts you need, when you need them. 

To learn more about our strategic sourcing, cost savings, product lifecycle management, excess mitigation, and inventory management solutions, visit fusionww.com and follow Fusion Worldwide on LinkedIn.