The world wide supply chain for electronic components, has been dramatically impacted by the global pandemic causing a component shortage.
Beginning in the later part of 2020 demand from the automotive, and 5G verticals increased to unprecedented volumes causing extreme allocation, price increases and extended lead times, causing an electronic component shortage. This combination of crushing demand and allocation in the first quarter of 2021 has only exacerbated the global supply chain’s ability to deliver its products.
The pandemic has severely disrupted supply chains, driving up prices and lead times
The pandemic has forced companies and consumers to invest in more advanced technology. Gaming systems, computers, tablets, and phones were increasingly purchased to facilitate their work from home environments.
Companies like Samsung and TMSC, called “fabs” did not have the capacity to meet the surging demand. This coupled with a raw materials shortage of substrate limited how quickly the fabs could ramp up capacity.
The rise of 5G technology is playing a vital role in demand
As the world continues its transition from 4G technology to 5G, many major players, especially in mainland China, placed massive orders just after the Chinese New Year (February 12th). The 5G market was originally predicted to hit 500 million during the year but instead hit the 500 million mark after the placement of those orders. Keep in mind that this excludes Samsung and Apple, two of the world’s largest smartphone manufacturers.
Three major global chip plants have resumed operation, the industry looks forward
There is good news on the horizon. Renesas Electronics Corporation has resumed manufacturing after a level 6 earthquake occurred on February 13th, 2021. Luckily, their downtime and damage were minimal, so they were able to resume production within a week. Additionally, three major chip plants in Austin, Texas – NXP, Infineon, and Samsung were shut down because of the severe winter weather that occurred in Texas during February.
Who does this chip shortage directly affect? Everyone! As a result, this allocation will continue to drive up prices and demand for electronics at least through the second quarter of 2021.