After a well-deserved break for many observing Christmas and the Gregorian New Year, the worlds next celebration is Lunar New Year, to be welcomed on 1st February 2022. This will see the closure of the year of the Ox, and new celebrations welcoming the year of the Tiger, specifically, a Water Tiger. The year is said to be a year of positive changes… let’s hope some of the superstition flows into the global supply chains supporting the electronics and electro-mechanical markets!
Once the celebrations for New Year are over, we move straight into the Beijing 2022 Winter Olympics. Although China has a limited spectator policy in place, it is excellent to understand the games are still going ahead, even whilst they are continuing to aim for ‘zero covid’ in the Republic.
The global supply chain feeding into electronic components and electrical items is still suffering from the same issues that have been reported since the outbreak of the pandemic in 2019. Capacity constraints, factory backlogs, logistic difficulties and increased costs, raw material shortages, factory fires, energy crises, natural weather phenomena and Trade Wars having all played their part over the last 24 months in shaping the world we live in today.
Capacity and lead-time issues
- Allegro are still managing supply issues and capacity constraints, with their product portfolio reportedly on allocation, minimum observed lead-times are in excess of 52 weeks for all product.
- Manufacturers are still decommitting from confirmed dates due to supply chain issues, most of these decommits are late in the day and beyond anyone’s reasonable control.
- Semiconductor lead-times are extended in almost every example, and we are regularly observing 52-week lead-times as standard.
- Manufacturers are not allowing expedites until orders are late to their quoted lead-times… if we are working to a 52-week lead-time, the order cannot be progressed until week 53 from order placement.
- One semiconductor manufacturer is reported to have a 50bn annual capacity, with a 150bn order backlog, highlighting how constrained factories are.
- Electrical products are under supply difficulties – Siemens, Schneider, Omron, Lapp and Murr are facing difficulties in supplying some product families.
- TI lead-times are still lengthy with no improvements seen or forecast for the next quarter at least.
- Toshiba halted production after a 6.6 magnitude earthquake earlier in the month, with the manufacturer confirming some damage to semiconductor production lines.
- The average semiconductor reserve levels for 150 USA businesses is said to be at a median average of just 5 days inventory, compared to 40 days pre-pandemic levels.
- Intel are looking to build a new plant in Ohio, potentially being the worlds largest chip making complex in New Albany, backed by up to $100m investment to create around 3,000 new jobs.
- TSCM are planning to invest up to $44b to increase capacity in 2022, supporting global demand for AI and 5G chips used in cars, data centres and smartphones.
- Nvidia are no longer expecting their bid to close for the purchase of Arm, valued at $40b in September 2022.
- Maxim Integrated is now part of Analog Devices and they have selected Arrow Electronics to be their Global Supply Chain partner.
- Panasonic has launched its new material for multi-layer PCB’s needed for high speed communication networking applications – they have named it Megatron 8 and claim it cuts transmission losses by up to 30%.
- Chinese New Year is expected to cause some disruption to production and freight from the Far East, especially around PCB’s throughout February whilst the holidays are celebrated.
- Prices are continuing to rise throughout the supply chain and are being applied to all product from packaging to components, to extraordinary freight charges, and are being applied to new orders as well as order backlog. Raw material costs, shipping costs, production cost increases and energy increases are all equally contributing to these increases.
- Copper pricing is affecting the price of cables, PCB’s, and other technologies heavily reliant upon the commodity.
- Some manufacturers are applying quarterly increases, and these increases in some instances are as much as 20% on existing costs and price agreements.
- ADI have imposed price increases in 21Q4, with additional increases on legacy product and 6% on the Maxim portfolio line.
- Emerson, Finder, Entrelec, and Eaton have all released new pricing taking effect in January or February 2022.
- Oil pricing has fluctuated since our last blog but is now back to around the same price as in October 2021, elevated a little to $89 a barrel.
- Gold has remained relatively stable trading at £1,365.67 per ounce at time of writing.
- Silver pricing is generally steady when looking at price graphs and is now trading at £17.72 per ounce.
- Steel rebar has been fluctuating over the past quarter; 6-month contract pricing is reported to be $707.
- Cryptocurrency has fallen sharply with Bitcoin 50% down on its record high seen during 21Q4.
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