By Jim Griszbacher, Director Of Systems Engineering at Opentrons Labworks Inc.
Under normal supply chain conditions most semiconductors, motors, etc can be sourced either immediately from available stock for a premium or on a standard factory lead time of 8-14 weeks with preferable pricing. As usual, good production forecasting is necessary to plan out material consumption and sourcing strategy to capitalize on longer lead time pricing. But we are no longer floating through normal supply chain conditions, as the Suez Canal shows us, we are in uncharted territory.
Current State of Electronics Sourcing
In some cases, lead times for select electronics have now expanded to 52 weeks. The pre-COVID tariff war between the US and China had already targeted and strained the electronics supply chain, but as factories completely shut down for weeks in China during the initial COVID surge in Q4 2019-Q1 2020, a massive hit to the global semiconductor industry occured.
As Megan Nichols wrote in Electronic Design in June 2020, “During this time China’s Manufacturing Purchasing Managers Index—a measurement of the health of the manufacturing sector based on new orders, output, employment, delivery times and other factors—fell to its lowest level since the index was rolled out in 2004.”
We began to see the aftermath of this index drop immediately as many of these factories took months to restart and stabilize, resulting in further loss of output. The situation worsened when a Samsung silicon foundry shutdown due to the Texas snowstorms in February 2021, followed by a fire at a major global semiconductor supplier in March 2021, and similar scattered global electronics misfortunes – including the Suez Canal blockage.
Meanwhile, OEM’s rushed to restart their own production and begin hoarding components to survive the drought, rapidly depleting distributor stock and leaving extended lead time sourcing as the only option. Others resorted to sourcing counterfeit parts.
All in all, an unprecedented global supply chain issue such as this is serious enough to draw attention from world leaders and the entire automotive industry.
What are we hearing from distributors and suppliers?
Because of this disruption, distributors and suppliers are seeing:
- Unprecedented demand, and customers hoarding components
- Customers being surprised by counterfeit components when desperately purchasing on the grey market from non-authorized or non-franchised sourced
- Suppliers forcing customers to commit to NCNR (non-cancelable/non-returnable) orders to prevent them from hoarding components and further disrupting the supply chain.
- Other shortages/price gouging is happening in steel, wood, and copper deficiencies
While nothing is set in stone, they are predicting that the market will begin to stabilize to normal starting in ~Q2 2022, but as we all learned from the PPE shortage – anything can happen between now and then.
As a Startup, What Can You Do?
- LEAN ON YOUR RELATIONSHIPS – reach out to distributors (Future Electronics, Arrow, Avnet) and local reps for advice and help in planning. This is going to be necessary for even prototyping small quantities of products. Suppliers can also help you to identify potential alternative components like automotive rated components which are functionally equivalent.
- IDENTIFY HIGH RISK COMPONENTS – most semiconductors and electronics adjacent components are impacted
- SCRAMBLE AND BUY – scrape the electronics distributors for what is currently available. Octopart is an amazing resource for this. Partsimony can help you source additional components and suppliers.
- DEVELOP A FORECAST – even for new products not yet in production, begin thinking 6+ months in advance and begin placing orders. If you are unsure how to begin, please reach out to your advisors, mentors, and the For ClimateTech Community – we can help!
- LEAN ON YOUR CM – if working with a highly integrated contract manufacturer, leverage their supply chain resources to assess and develop a plan
- LEAN ON YOUR SCALE FOR CLIMATETECH TEAM – Finding no way to address your supply chain issues – let us know and we will try to help.
- GOOD LUCK!
Are you experiencing shortage in your supply chain and need help? Please let us know – firstname.lastname@example.org