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Semiconductor Shortage Creates Challenges for Industry

Semiconductor Shortage – A Challenge for OEMs Everywhere…

Since the onset of the Covid-19 Pandemic in Q1 2020, our industrial manufacturer clients in Europe and around the world have faced numerous challenges. Protecting their staff from infection, dealing with falling demand for their goods, maintaining their production and R&D efforts whilst under extreme pressure – all of these have occupied huge amounts of time/money/effort since the onset of the crisis. Congratulations for all you have achieved so far – the Eurocoin team continues to work shoulder-to-shoulder with you all, to try and assist wherever we can..!

However, just as the long-awaited vaccine roll-out commences across Europe and we start to anticipate safer and better times ahead, along comes another unexpected set-back….a semiconductor shortage of unprecedented proportions now threatens the recovery of technology businesses in every market sector. It is so serious that the BBC has named the problem not Armageddon but ‘Chipageddon’ – an event that (though unlikely to actually ‘end’ the world!) is already adversely impacting businesses reliant on the stable supply of electronic components to keep their production lines running efficiently.

Semiconductor shortages and price increases

The semiconductor shortage issue was first being reported at the end of the year in 2020. The automobile sector had seen a huge reduction in their own production due to the Covid crisis; however, global lockdown and the growth of 5G networks had actually increased demand for these components in mobile phones, laptops and tablets. As the automobile sector output started to recover, the IC fabrication shortage worsened. Peng Jin, Senior VP of SMIC, was quoted in December forecasting supply chain problems which would undoubtedly lead to shortages and rising prices.

Likewise, Netherlands-based specialist chip supplier NXP Semiconductors has told customers it must raise prices on all products due to these pressures.

As we approach the end of Q1 2021, it is clear to all businesses involved in component production, sourcing and supply management that this situation is continuing to deteriorate. Michael Knight, President of the TTI Semiconductor Group, summarized this difficult situation precisely in a recent statement, where he confirmed “Lots and lots of parts are getting harder and harder to get….I think it safe to say that in the first half of 2021 we are going to see a situation in the supply chain like that of 2018, only worse…”. The warning published in Industry Week in 2018 is no less relevant to our circumstances now in 2021 – “If you’ve operated ‘business as usual’, hoping that the global electronics components shortage would end soon, it’s time to rethink that strategy. A tough situation is becoming even tougher to navigate”.

Air Cargo Costs Rising

The semiconductor shortages and delays are compounded by rising international freight costs, as components are increasingly moved between continents by air, rather than sea-freight.

This logistics problem was made worse by the fact that air cargo capacity from China dropped by -39% during the Chinese New Year festivities.

Prices rise, consignments are delayed further and these obstacles to business continue to frustrate manufacturers around the world.

So, given these unprecedented circumstances, where automobile manufacturing giants such as General Motors and Audi are actually being forced to close their production lines due to semiconductor shortages, what is the way forward for Eurocoin customers..?

Our advice is as follows:

  • Stay connected with your Eurocoin representative 
  • Anticipate challenges to your business
  • Be realistic in your product landed-cost expectations 
  • Plan ahead and order early

We hope to be able to minimise the disruption to our hundreds of manufacturing customers across EMEA and beyond during these very difficult times. We are already holding large stocks of core components at our warehouses across Europe. However, the components fabrication business is reporting set-backs and changes on an almost daily basis currently. Lead times, prices and logistics vary with very little notice. As Bloomberg reports, this is a situation that is unlikely to be resolved in the immediate short-term….

The Eurocoin team are working tirelessly now together with you, our valued customers, and with our international suppliers to ensure we can secure the components you require to maintain your own production line builds. It’s not easy, but we can assure you of our total professional focus on this global problem.

Let’s work together to overcome these challenges! #WeHelpBuildYourFuture

Please do not hesitate to contact us directly if we can be of any direct assistance.