It’s not just semiconductors that are in short supply

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James Carbone – Contributing Editor

Lead times are stretching and prices are rising for passives, connectors and power supplies.

It’s no secret that electronics purchasers are being challenged by allocations, shortages and long lead times for a variety of semiconductors including microcontrollers, diodes, graphics RAM chips and power semiconductors, among others.

However, while chip shortages seem to be garnering most of the attention, supply is tight and lead times are stretching for many capacitors, resistors, and other passive components, connectors, electromechanical devices and power supplies. Prices are also increasing for many electronic components , ranging from the mid-single digits to 30 per cent.

David Stein, vice president, global supplier management for Digi-Key Electronics, said the “supply situation with passives is tight” with lead times stretching to 35 weeks for some passives. For instance, in March multilayer ceramic capacitor (MLCC) lead times were about 16 to 20 weeks. In early May they moved out to 30 to 35 weeks, he said.

One reason is strong demand from automotive systems manufacturers. “Automotive demand has put a strain on most suppliers to some degree depending on how entrenched a supplier is to the automotive area,” he said. Stein added there is also tight supply for thick-film resistors with some suppliers and not so tight with others. “It varies with their engagements with the automotive industry as well,” said Stein.

He added there is also tight supply with “a different type of resistors called sense resistors. Those lead times are hovering around the one-year mark,” said Stein. “You can blame automotive for that as well.”

A sense resistor helps measure the amount of current that is flowing in an electrical system. It senses the current and can moderate the current if necessary if the current is too high.

He said another challenge for buyers is aluminum capacitors because demand is up significantly. “The problem with aluminum caps is that they are pretty heavy so shipping them by air is not an option,” according to Stein. “They have been constrained because some of the supply-chain limitations involving ocean freight,” he said. Lead times have been extended by 6-10 weeks because of the backlog in the supply chain“ relating to ocean freight including a lack of containers and port delays.”

Relays are also experiencing extended lead times. Lead times for general-purpose relays are 24-28 weeks. Automotive relays have been extended to the past 12 months to about 35 weeks, said Stein.

Lead times vary by product
Eric Pratt, senior vice president of global marketing for component manufacturer AVX, said one reason for rising lead times is robust demand. Demand for tantalum, ceramic and polymer capacitors “has been very strong and we are projecting demand to remain strong through the balance of the calendar year and probably through the first half of next year,” he said.

AVX’s lead times “vary by product and can vary by a customer or where we have contracts. But our general lead times for passives have gone out 6 to 8 weeks” since the first of the year. Lead times range from 12 weeks to 22 weeks, depending on the product. Normally AVX’s lead times would be off the shelf to 2-8 weeks.

“Supply is very tight. Some parts are in shortage situations, including certain mixes of ceramic capacitors, and tantalum capacitors,” said Pratt.

While demand for AVX’s components is strong, the passive manufacturer’s business is being impacted by the semiconductor shortage. “If OEMs are not building boards because of a shortage of semiconductors, they don’t need passive components either,” said Pratt. However, some electronics manufacturing services providers seem to be very aggressive in trying to secure an inventory position for passives. “A materials manager does not want a build to be held because some lower-cost passive component” was not in stock, he said.
AVX’s business is also being impacted by tight supply and rising prices for raw materials. Pratt noted that the price of copper has tripled over the last year and the price of palladium has doubled. Prices for rubidium, silver and resins also have increased. “Resins have gone up significantly because of the petroleum industry. With the price of oil increasing that has a direct impact on the price of resin,” said Pratt.

Higher material costs mean higher component prices. “When we see materials cost increases we certainly have to react to that,” he said. Component prices have increased mid-single digits to 30 per cent due in large part to increased cost in raw materials and logistics costs, according to Pratt. “We don’t do opportunistic pricing to the channel,” he said. “We have long-term contracts with most of our partners and we honor all those contracts,” said Pratt.

AVX is adding capacity which could help to lower lead times and prices eventually. “We have a long-term capacity expansion plan and we are holding to that. We are doing big investments in ceramic caps, tantalum and some other products,” said Pratt.

He added AVX has 30 operational facilities. “Almost all of our facilities are now operating very close to 100 per cent” after production slowed or stopped last year because of the pandemic, he said.

Longer waits for power supplies
Long lead times for passives are impacting power supplies. Lead times for power supplies have stretched to about 30 weeks, according to Stein.

Christoph Wolf, president of power supply manufacturer RECOM’s Americas business unit, said power supply lead times are stretching because of shortages of some semiconductors and passives used in power supplies. RECOM builds power supplies for industrial, medical and transportation systems.

“There are allocations for many of the components that we need to build our power supplies,” said Wolf. “We need 30 to 50 different components and you only need one on allocation to sabotage our lead times.” He said logistics is also an issue that is driving lead times. Demand for logistics services is surpassing capacity, which is contributing to longer wait times for parts and to higher prices.

Strong demand is also contributing to longer lead times and higher prices for power supplies and in sales increases for RECOM. Despite the pandemic, which temporarily halted a lot of electronics equipment production last year, RECOM’s power supply sales increased 18 percent in 2020 and the company expects to post a 20 per cent increase in revenue in 2021, said Wolf.

RECOM was not the only power supply manufacturer that had robust sales in 2020. Mohan Mankikar, president of power supply research firm Micro-Tech Consultants, said the power supply market did better than expected last year. He said the global switching power supply market had been expected to decline about 1 per cent because of the disruption caused by COVID-19. However, revenue ended up rising about 4.5 per cent for the year. Switching power supplies should grow another 7.5 per cent in 2021, he said. However, there is uncertainty in the market.

Mankikar said the first half of 2021 will likely be strong “but we don’t know what’s going to happen in the second half. It could be the same as the first half of 2021 but nothing is simple anymore. Business is up and down. There are so many variables,” because of the pandemic, he said.

Power supply demand strong
Still, Mankikar forecasts the global switching power supply market will rise to $35.4 billion in 2021 and will post a compound annual growth rate of 5.9 per cent through 2025. Strong demand, however, most likely means lead times will likely remain long for the year for power supplies and components.

“There are many verticals that need components besides automotive, “ said Stein. Applications involving 5G, industrial automation, medical, and others all require components and demand for them continues to grow.

Stein said lead times will not get any shorter before the end of this year. If demand continues to grow, “I would not be surprised in a month or two suppliers might use the allocation word and a capacity reservation order will be necessary. It certainly is heading that way,” he said.

Longer lead times for connectors
Strong demand is also occurring with connectors. Don Hnatyshin, senior vice president supply chain for connector manufacturer Molex, said connector demand is rising for a range of reasons including cloud and data center expansions, Industry 4.0 requirements, electric vehicle growth, greater adoption of factory automation, and advancements in technology such as artificial intelligence.

Strong demand combined with “force majeures” in the resin supply chain have contributed to long lead times for connectors. Production of resin, which is used in many components, connectors and printed circuit boards, slowed or shut down earlier in the year after a major storm knocked out power in Texas where a lot of resin is produced.

The impact is still being felt. Hnatyshin said lead times for some connectors, such as FAKRA connectors used by the auto industry, have increased byalmost 100 per cent.

“Lead times for mini-FAKRA connectors are expected to increase as this technology ramps in automotive,” he said. Capacity constraints for custom connectors also will occur without long-term forecasts in place. Lead times for off-the-shelf connectors have increased from 12 to 26 weeks, while lead times for USB connectors now are stable, according to Hnatyshin.

Some of the tight supply of connectors is due to extended lead times from material suppliers, he said. Metals used for contacts and assemblies and resins are in very tight supply. “Due to the February storms in the southern and central parts of the United States, many resin suppliers have applied force majeure contract clauses and are not able to supply materials,” said Hnatyshin.

He said many metal and resin suppliers were unprepared for the “quick snap back in demand, particularly in automotive segments” and most are extending their lead times.

Prices increase
He said connector prices are rising because of higher materials and logistics costs. “Copper, gold, zinc, aluminum and other metals, in addition to resins are all at multiyear record highs,” said Hnatyshin. Some of the cost has been absorbed by connector manufacturers but some are being passed along to customers.

The same is true with increased freight and logistics costs. “The cost of air freight since the beginning of the pandemic has increased as much as 4X, in some cases,” said Hnatyshin. At the same time, overall capacity has been drastically reduced, due to commercial airlines operating fewer transpacific and transatlantic routes. As an alternative, relying on ocean freight has added to lead times in the supply chain that then have been compounded by port backups, he said.

Connector supply will likely remain tight this year due in part to the auto industry, said Hnatyshin. In fact, the largest demand for connectors for Molex will be the auto industry. “ Primarily, this is due to the rapid increase in the production of electric vehicles (EVs),” he said. “Electronic content in EVs is considerably higher than combustion engine vehicles and both are getting tailwinds from the growth of autonomous capabilities.”

Strong demand from automotive combined with growing demand from other customer segments could mean tight supply and long lead times for several years unless substantial capacity is added.

“We see demand for connectors continuing to increase, especially for 5G and 5G-related systems and device implementation in computers, communications and consumer electronics,” said Hnatyshin. “ The rollout of 5G technology is gaining momentum at all levels, spanning infrastructure to handsets, he said.

Also contributing to greater connector demand by automotive is the quickening pace of “new product cycle times, which will result in the full-scale transformation of cars and the entire automotive industry,” said Hnatyshin This includes everything from electrification, autonomous vehicles, ridesharing, 5G communication and other functions delivered via the cloud, he said.

As these trends accelerate, so does the need for more connectors, resulting in a positive outlook for the connectors market from a long-term perspective, according to Hnatyshin. “We estimate a compound average annual growth rate of greater than 5 per cent percent for the next three-to-five years as the market expands to fulfill continued demand.”