The global electronics manufacturing industry is in the midst of unprecedented times. In the space of just a few short months we've witnessed the initial impact of the new ‘5G’ network, the creeping in of extended lead-times, the return of allocation on some MLCCs and, of course, the rapidly accelerating COVID-19 pandemic. All the current challenges notwithstanding, here is the latest quarterly roundup of key developments in the global electronics component market.
Capacity and lead-time issues
Governmental lockdowns worldwide have impacted on all areas of the electronics manufacturing supply chain, from base metals and wafers to plastic screens. With Malaysia and the Philippines only allowing essential operations until at least mid-April 2020, semiconductor availability issues are anticipated as a number of fabs are temporarily closed. For those manufacturers (Texas Instruments, NXP, Cypress, Hirose, Littelfuse, ADI/LTC, ST Micro, Sharp, Xilinx, Maxim) that rely on at least some of their production taking place in these countries, lead-times may well extend and stock could become limited.
Sensor solutions provider TE Connectivity continues to struggle with allocation on relays and ever-increasing lead-times for other products. To mitigate future supply chain disruption, its advice is to place forward orders and to order in larger quantities where possible.
TDK, Walsin and Yageo have all been reported to be on allocation for many of their MLCC lines, with some sources also citing that Panasonic and AVX are struggling for capacity. The majority of lead-time issues over the last 12-18 months have been fuelled by allocation that dates back to 2018. Unfortunately, there has not been enough time for these issues to recover in order to maintain any length of full capacity output.
However, as many automotive companies are on shutdown globally, there is the chance for the strain within the marketplace to ease whilst essential operations continue, and with sufficient stock in the supply chain to support those activities in the short-term. Whilst essential manufacturing operations continue, a number of larger businesses have also been able to redirect some of their resources into looking for a vaccine for COVID-19 or supporting the health service by designing and manufacturing additional ventilators. Unsurprisingly, all pricing is highly volatile whilst the world reacts to COVID-19. Many manufacturers also appear to be prioritizing medical and essential customers, which could well compound allocation on all electronics.
Capacity / lead-time at a glance
ST Micro have temporarily cut 50% of their production in France.
Keystone have suspended all operations in Europe and are not receiving or shipping any goods until further notice.
Shortages have been reported on Xilinx XC7Kxxx series with increasing lead-times observed.
Mergers & Acquisitions
On March 27th, 2020, US electronic component manufacturer AVX announced the completion of its acquisition by Kyocera Corporation.
Semi-conductor manufacturers Diodes Inc. have received approval from the Taiwanese regulatory group to move forwards with their proposed acquisition of Lite-On Semiconductor and say they are confident that the transaction will close as planned once final regulatory approvals have been secured.
ST Microelectronics are looking to acquire a majority stake in Exagan who offer high performance power devices with specialisms in 200mm wafers. It is believed this will help ST with the global shortage of silicon carbide needed to produce semiconductors, in the same way that their acquisition of Nostrel strengthened their SiC ecosystem.
After multiple extensions to the Chinese New Year period amid the outbreak of COVID-19, it is reported that most Chinese operations as far as PCBs are concerned are now back to above 80% capacity and steadily increasing. Although capacity is back online, there is clearly still a backlog for factories to work through, so delays to shipments are expected in the short-term. While capacity continues to steadily increase, the next issue along the chain relates to freight and shipping. With reduced cargo flights from China, and very limited passenger flights with cargo space travelling to Europe, both space and air freight are at a premium - with the introduction of a Peak Season Surcharge now being applied.
Global Pricing Uncertainty
Wurth have announced that in reaction to COVID-19 they will not be applying their annual price increase in April 2020. To the contrary, Xilinx are expected to increase pricing once again by up to 5% in July 2020
Oil - pricing is rapidly falling with the price at the time of writing at just $22.76 per barrel – the lowest level seen for 18 years.
Gold – prices have increased by 5.9% against the 4Q19 increase of 7.97% over the last quarter, pricing is now £1300.00 per oz.
Silver – prices have fallen since January by 15.40%. Pricing is currently £11.46 per oz. with a low of £9.60 seen in the middle of March.
Copper – pricing is marginally lower than in January at $2.16/lb, yet this is the 52-week low against pricing.
The situation that the global electronic component industry currently finds itself in is unparalleled, both in its scale and scope. Analysts, distributors and buyers are all predicting further supply chain disruption in the weeks and months to come. However, without any historic data to draw on, it is a challenge that we will all have to face, and overcome, together.