The ongoing electronic components shortage continues to disrupt businesses across the economy. Combined with other current supply chain crises — like growing port congestion and a shortage of truck drivers — the shortage has made electronics device manufacturing much more of a challenge.
For businesses navigating the shortage, these strategies may be the most effective to implement until the market is able to provide more normal levels of supply.
The current state of the electronic components shortage
A number of major component types face shortages right now.
Most important is the shortage of semiconductors, caused by a combination of lingering Covid-related manufacturing disruptions in East Asia, limited availability of critical semiconductor materials, and growing demand for electronic devices.
Demand for semiconductors grew by more than 30% between August 2020 and August 2021, despite slower-than-usual economic growth.
The expansion of the IoT market, the development of technology like the IoT semiconductor, and the rollout of 5G likely helped drive this surge in demand.
Other essential components and raw materials are also in short supply — making manufacturing challenging even when businesses can source the semiconductors or semiconductor-dependent parts they need.
The availability of key passive and power supply components like multilayer ceramic capacitors (MLCCs), diodes, transistors, and resistors has also been impacted by the pandemic and current supply chain challenges. Like semiconductors, these components may be difficult to source.
When will the shortage end?
Experts aren’t entirely sure how long any of these component shortages will last. However, many have predicted that manufacturers will see some relief in 2022.
Yole Développement Economist Guillaume Assogba, for example, told Windows Central that he expected the end of the shortage by late 2022. Assogba predicts that consumer tech manufacturers will recover first due to stronger ties between that industry and the electronics component industry.
Sectors that did not work as hard to maintain connections to electronics components manufacturers during the pandemic — like the automotive industry — may not recover until some time in early 2023.
In any case, businesses should expect shortages of both electronics and components to last well into 2022.
What businesses can do right now to adapt
Businesses are adopting innovative strategies to navigate the current shortages.
Some of these strategies cut across industries and sector niches. All businesses, for example, can benefit from developing stronger relationships with component suppliers.
Building partnerships with suppliers
These relationships and regular communication may mean that suppliers will provide the latest update on market conditions, advanced notice on part availability, and potentially advice on navigating future shortages.
Businesses that maintain their relationships with suppliers will likely have the easiest time recovering as the shortage ends. Many chip suppliers are also offering preferred customer programs and similar initiatives that provide customers with priority if they commit to long-term business relationships.
If a business can afford to lock into a six-month or longer contract, it may be able to secure a supply of essential components well into the future.
Building resilience into the business’s supply chain can also help the company prepare for future crises. Diversifying suppliers, expanding storage capabilities for essential components, and investing in risk management can all help a brand protect itself against potential future supply chain shocks.
In any case, businesses should avoid grey-market suppliers and unofficial suppliers when trying to manage current shortages or diversify their supplier base. The quality and reliability of these suppliers and resellers may be lower than more legitimate suppliers — negatives that can outweigh the benefits of working with grey-market suppliers, even when they can provide chips when other manufacturers cannot.
Changes to manufacturing processes and product design
Businesses may also need more immediate solutions to manufacturing and supply chain issues. Temporary chip replacement, for example, could be necessary for companies that are unable to source their desired chips.
Replacing current chips with chips that have more or less memory than the current solution is one possible option. Budget adjustments may be necessary for larger chips, while smaller chips may only be workable with new firmware that requires less memory.
Designing around shortages may be the only short-term solution to certain product availability issues, especially for industries that may not see relief until early 2023.
Preparing new designs for future shortages can also help the business prepare for future crises. Open-ended designs that can be easily reconfigured based on component availability may help keep production flexible, enabling the business to move quickly in the event that shortages make a preferred chip or component impossible to source.
Planning can help businesses navigate the electronic components shortage
Experts predict that the electronic components shortage may last well into 2022 — and potentially beyond for industries that have not maintained strong relationships with suppliers.
Until then, components like semiconductors, transistors, and resistors, along with essential raw materials, may remain in short supply.
The right planning can help businesses navigate the crisis and prepare for future supply chain shocks. Stronger partnerships with suppliers, a diversified supply base, and flexible designs may all make this shortage more manageable.