Electronics

Same as Q1, but Pricier

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Just about a year ago, promising electronics companies predicted that semiconductor supply constraints would be eased. Late 2022.. It’s in the rearview mirror, as the component lead times range from 60 weeks to a year. In fact, Intel CEO Pat Gelsinger told analysts this week about a chip shortage. Will continue until 2024..

For buyers, the second quarter is a lot like the first quarter, but more expensive. Of the supply frame Commodity IQ analysis shows some tough trends. Parts will continue to be in short supply and prices will continue to rise. Eighty-five percent of the intelligence company’s pricing dimension is expected to grow in the second quarter, and 83% of the lead-time dimension is expected to grow.

Industry observers expect a 5% to 15% price increase.

The usual causes-material shortages, inflation, logistics disruptions-are hanging. Recently, China’s “Zero Corona” policy has restricted the production and transportation of materials, subassemblies and finished products that are essential to the global electronics supply chain. Freightos, the freight market, reports that exports from China have been significantly reduced.Russia’s invasion of Ukraine required some logistics workarounds and some workarounds Metals and materials Those used in semiconductor manufacturing are sourced from the region.

Certain product categories may loosen as 2022 progresses, but indicators show a few more quarters when supply is limited. “Sustainable Covid-19 eruptions in two-thirds of China’s states and elsewhere in Asia are encouraging government-mandated closure and strict containment protocols. Creating and supplying additional labor restrictions. It puts pressure on and disrupts the new supply chain, “said Richard Burnett, Chief Marketing Officer. Supply frame SaaS sales leader. (Commodity IQ combines analysis with analysis of its electronics market intelligence.)

“I think the impact of the Shanghai blockade is just beginning,” Burnett added.

Resin raw materials and additives have been added to the long list of undersupplied materials. Labor shortages limit production capacity and demand is shifting among different materials. Producers of chemical products could not keep pace. Due to material constraints on the front end of component manufacturing, few suppliers can increase production.

Russia’s invasion of Ukraine changed air routes and routes, increased fuel costs and limited cargo capacity. The supply of minerals and metals from the area has stopped.

Supplyframe shows stability in some component areas, while other component areas are allocated in the second quarter. “Passive shows signs of stability,” says Burnett. Still, complex analog semiconductors (ASICs, MCUs, MPUs, PLDs), flash memories, non-ceramic capacitors, resistors, and standard logic devices are expected to increase in price with very few exceptions. .. Most of the same devices will remain or exceed the already elevated lead times.

Electronics sellers, who manage a significant amount of parts inventories in the industry, do not expect a plunge in the second quarter. Executives told analysts that they were generally able to meet customer demand, but did not expect supply to open.

“I don’t say [inventory] It’s declining and not completely flat, “says Sean Kerins. Arrows The next CEO told analysts. “I would definitely say it’s not up. So the supplier can increase the quantity so we get more supply — and it’s an irregular supply at first. But it’s a long way off. But I think it’s still the same. I think there’s still more price increases. And hopefully we’ll start out of the product later this year. . “

“I want to increase my inventory a little more, but that’s a good thing,” he said. Avnet CEO Phil Gallagher on Avnet’s earnings announcement. “But while we can handle the call quickly, we serve our customers pretty well. [come in] It’s still almost every day. “

Barnett of Supplyframe states that long component lead times mean that OEMs are forecasting 50-60 weeks. Historically, long-term forecasts have been inaccurate. In the short term, a vigorous design cycle continues, indicating that product demand will remain strong for at least the next 18 months.

Big change in purchase

OEMs and their EMS providers are responding to the seller’s market and facing a new procurement environment. Due to the very small number of parts, many orders are considered “no cancellation, no returns (NCNR)”. Buyers are accustomed to placing and canceling orders without pushback. Annual price cuts are a thing of the past.

Avnet Matt Ransom

NCNR is not popular with customers, but resistance has eased as the shortage continues, said Mat Ransom, director of EMEA supply chain and operations at Avnet Silica. “I don’t say they accept it, but the early” shock and awe “turned into” willing to negotiate. ” The reaction three years ago was “no way”. “

Distributors benefit from suppliers Price increase Expected to stick. Supplier pays higher prices for materials, labor, and logistics passed to customers.

According to Barnett of Supplyframe, double orders that have contributed to past overstocking do not seem to be widespread. “The shortage that lasted from nine months to a year has eliminated many of them,” he said.

The automotive industry, which was hit hardest by the lack of chips, has also changed its purchasing habits. Some automakers are partnering with chip makers, and more are looking to supply chain management channels.

A study Avnet Silica has analyzed the public financial records of major semiconductor and automakers. It has been revealed that 45% of the world’s major automakers have announced line outages over the past year due to supply chain shortages.Car maker During this period, it lost more than $ 300 billion in sales and more than $ 500 billion since the start of the pandemic.

moreover:

・ ・ 70% of the world’s leading automakers announced a line outage last year

・ ・ Semiconductor inventory levels have fallen 43% in two years, reaching their lowest points in more than a decade.

・ ・ Chip makers had only 23 days in stock of finished products, but lead times exceeded 150 days, and some chip makers had short inventories of 3 days.

“I think it’s been more accepted that there are trade-offs with long-term relationships. [car makers] They have entered an environment that they do not normally control, “Ransom said. Automakers are competing with consumer electronics companies for limited chip supplies.

Historically, automakers have sought low prices and flexible cancellation policies from their suppliers. While chip makers frequently update their products, their design and product life cycle is long. Design wins mean longevity for chip suppliers, but initial order volumes are overwhelming.

With the proliferation of electronics, automakers are looking for buyers with industry expertise.

“We’re getting more information from car makers,” Ransom added. “In the short term, it’s about how to keep the line up and running. In the long term, it’s an option to contract with a distributor.”



https://epsnews.com/2022/05/12/q2-supply-forecast-just-like-q1-but-pricier/ Same as Q1, but Pricier

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