Navigating supply chain shortages

Digi-Key’s director of regional supply chain solutions, Margaret Cunha, explains how the company is helping buyers weather the supply shortage storm 

While the term borders on overuse ‘unprecedented’ certainly describes the current supply chain shortages of electronic components. Supply chains were beginning to tighten before Covid 19 and the effects of the global pandemic slowed or shuttered production of essential components for days, weeks or even months.  As we see light at the end of the tunnel, industries are beginning to ramp up production and electronic component demand is through the roof. While the ‘perfect storm’ of supply chain issues rains down, Digi-Key is helping purchasing professionals shore up electronic components and navigate shortages.  In nearly every industry demand for components has rapidly revved up, all at the same time. From automotive and smartphones, to medical and IoT markets, all need increasingly larger numbers of components for finished products. 

The following examples highlight the issues. The smartphone market is expected to grow by a compound annual growth rate of 11 per cent from now through 2026. Smartphone manufacturers alone use approximately 1.5 trillion multilayer ceramic capacitors, accounting for 50 per cent of worldwide production.  In the automotive industry, global sales of electric vehicles are estimated to increase more than 30 per cent in 2021 and electric vehicle engines use up to 22,000 MLCCs each.  Gartner reports the IoT market will grow by more than six times from $212 billion in 2018, to $1,319 billion in 2026. IoT devices like smart home thermostats, doorbells, alarm systems, cameras, appliances, fitness equipment and more, need sensors and multiple components to run. 

While demand has rapidly increased, supply has been under significant pressure due to the pandemic and a compounding range of challenges as described below. Staffing capacity has been a common issue for many manufacturing facilities as they adhere to Covid prevention policies including social distancing.  For similar reasons, freight is taking longer to move, across all industries and countries. Fewer available commercial flights and port issues are causing delays in product transfers and receipt of materials, including the Suez Canal debacle in March. Systemic issues include under-investment in eight-inch fabs, resulting in struggles to ramp up production. Without significant investment in a fab’s early stages, the supply chain is impacted for many years. Unfortunately, under-investment in this standard size years ago is causing significant shortages today. Extreme weather patterns are wreaking havoc on many areas including a drought in Taiwan which is forcing some manufacturers to truck water in, creating delays that could continue into June 2021.  

Several major factory fires have impacted commodity production, from the Asahi Kasei Micro and Renesas Electronics plant fires in Japan, to the Panjit International factory fire in Taiwan. All these factories were critical in producing specific oscillators, semiconductors and chips, and could take several months to resume full operations. Suppliers are doing their best to overcome these challenges and keep up with demand, working around the clock to get components where they’re needed around the world. As with most storm clouds, there are silver linings. While increased demand puts pressure on suppliers, it is a positive sign of recovery. Many distributors, including Digi-Key, predicted this sharp spike in demand. They proactively invested in significant inventory, while working closely with suppliers to expedite orders to ensure enough product is on hand to help customers weather the storm now and into the future.Working with global distributors like Digi-Key assures customers they will likely find what they need among 11.8 million available products, including 2.6 million in-stock parts from over 1,700 manufacturers.