G English Electronics’ MD, David English, explores the causes of current supply chain problems, while remaining upbeat regarding customer confidence and innovation.
The pandemic has shocked the global supply chain and impacted UK electronics manufacturing. Gelec can see that disruption will likely continue into 2022 and expects its impact may be felt into 2023. Historically, this industry has experienced shortages and price fluctuations but the current situation is unprecedented.
With some exceptions, we expect component prices will remain at current levels for some time. Price inflation was caused by increased demand, material cost and transport issues. For many items, capacity simply cannot meet demand and the improvements needed will not happen overnight.
Pre-covid the supply of most electronic parts was not a concern. However, the pandemic has created significant challenges for supply chains, putting them under intense pressure and exposing vulnerabilities. Providing normal working practices and capacities resume in coming weeks a path to recovery will become visible.
Sea freight capacity and container availability is unlikely to improve for many weeks. When ports are operating normally the backlog will reduce slowly. Staff shortages at ports and the pay/working conditions of critical workers, including HGV drivers need to be addressed.
There has been a significant reduction in airfreight capacity from Asia. When China reopens capacity will return and cost will reduce but this is months away.
China’s zero-Covid strategy means that further lockdowns are possible, stretching the situation, with quarantine delays and ships waiting to dock.
On a cautionary note, inflation and interest rates need consideration but the momentum is promising. With so many opportunities, the market expects to grow and customer confidence is high. Many developments and new products are due for 2022 release.