Viewpoint: Addressing the global shortage of computer chips & electronic components

Author : Mark Burr-Lonnon | Senior Vice President of Global Service + EMEA & APAC Business | Mouser

01 July 2021

Mouser_chip shortage_SmartCityLondon
Mouser_chip shortage_SmartCityLondon

Today’s modern world runs on computer chips. From laptops to smartphones, video games to smart home devices, the range of products that require chips keeps expanding. And with the rise of 5G & IoT devices, global demand for these components is surging to new heights.

This article was originally featured in EPDT's H2 2021 Electronics Distribution supplement, included the July 2021 issue of EPDT magazine [read the digital issue]. And sign up to receive your own copy each month.

The ubiquitous nature of the computer chip means that persistent shortages of such components represent a significant concern. But as Mark Burr-Lonnon, Senior Vice President of Global Service and EMEA & APAC Business at component distributor, Mouser Electronics tells us, many organisations worldwide are struggling to get hold of the number of semiconductors that they require — with prices rising and lead times lengthening. This has triggered panic buying in some sectors, which has further exacerbated the problem…

The pandemic has shifted the balance of supply & demand
So, what is behind the shortage? The issue can be traced back to the onset of the global COVID-19 pandemic, where lockdowns and sudden changes in working patterns disrupted so much of our daily lives. Many consumers became fearful of employment prospects and reined in big-ticket purchases, as a result.

The winds of change were felt particularly keenly in the automotive industry. New car orders fell sharply, and OEMs (original equipment manufacturers) were forced to close factories and reduce or cancel supply chain orders for components. Meanwhile, employees were working from home and the demand for at-home devices sharply increased, using up available supply. With lockdowns now lifting in many parts of the world, workers are returning to their commutes. Demand for new cars has rebounded, but carmakers have been caught with a short supply of components for their factories.

The automotive industry is also undergoing an unstoppable shift towards electrification, with growing need for electronic components for new engine management, sensors and controls. According to a study by management
consultants, Deloitte, semiconductor-based electronics already account for around 40% of the cost of a new car – and this is only sure to increase further. Therefore, it’s not hard to see why OEMs are suddenly scrambling for chip supply — and driving up demand.

Shortage impacting other market sectors
It’s not just about the automotive sector, however. The pandemic has had a profound effect on many aspects of our daily lives. Homeworking has triggered unprecedented spending on electronic equipment, as consumers upgrade laptops and tablets, conducting more and more of their activities
digitally and via video conferencing. This trend has had a knock-on effect, with electronic equipment manufacturers buying up as many components as they can get their hands on to protect themselves against supply constraints.

Also, supply constraints are not restricted to chips. Recent research from electronic components distributor, TTI, Inc. shows mega-trends such as 5G infrastructure and electric vehicles are driving demand for other components, such as capacitors, resistors and inductors. In some cases, lead times for specific types of multi-layer ceramic capacitors (MLCCs), with high capacitance values for automotive applications, have been extended to 26–53 weeks, with medium-term supply being described as ‘constrained’.

The shortage is leading lawmakers to call on their governments to subsidise and boost the fabrication industry. Yet, such multi-billion-dollar investments cannot happen overnight. Therefore, the next decade’s biggest challenge will be keeping up with demand as the digital age permeates every facet of life.

Staying ahead of supply shortages
From discussions with manufacturer partners, fabricators and other component suppliers are running at full capacity right now. It will likely take many months before they catch up completely. This current environment is therefore likely to persist until 2022.

These factors mean that the electronics industry relies more than ever before on the performance of distributors to get hold of the products that it needs. Inventory is paramount, and in today’s fast-paced market with high product innovation levels, that means stocking products from a broad range of manufacturer brands. Indeed, Mouser added over 70 semiconductor and electronic component manufacturers in 2020 alone, taking the total to more than 1,100 brands. This wide selection of in-stock inventory means purchasing professionals can usually find an alternative product if their initial choice is unavailable.

There’s never been a more important time to buy from an authorised global distributor. Our teams do a great job trying to stay ahead of lead time extensions and product availability issues. Customers are coming to us because we have inventory. Some sources are very limited in their component offerings, but that’s not the case with Mouser.

Distribution and logistics are critical, too. At Mouser, we choose to operate through a single Global Distribution Centre, shipping to all regions of the world. This set-up enables us to serve global companies who decide to switch their supply chains from one region to another — with our inventory still available to all. Every product is picked, packed and shipped from the same facility in Texas, rather than from multiple warehouses in different countries. This approach helps streamline logistics and minimise the impact of any supply constraints.

Buying from an authorised distributor is the only way to eliminate the risk of counterfeit or grey market products. With product supply shortages impacting many sectors, it has never been more important to select genuine products that are 100% certified and fully traceable from each manufacturer.

To conclude, electronic product shortages are likely to impact the market for some time to come. But by choosing a reputable and well-resourced distributor, like Mouser, it is still possible to ensure continuity and traceability of supply. This level of service takes the pressure off buyers and purchasers and allows engineers to keep on innovating during these difficult times.

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