Sourcing electronic components has been complicated over the last few years. However, some who follow the industry are now predicting there will soon be a surplus of semiconductors and related electronic components. Other forecasts by distributors and customers claim instead that shortages will last into 2023 and maybe even longer. These opposed opinions can be confusing for any manufacturer conducting an electronic component search.
The reason some have a negative perception of the state of the electronic parts market, while others are more positive, is a rather complex one. Yet it stems from uncertainty about broader economic conditions and the rapidly changing electronic components market. Though on the surface, consumer confidence in the sector may seem like it’s wavering, a quick look at demand shows that electronic component searches aren’t slowing, and 2023 looks to be a good year for the industry.
Sourcing Electronic Components: What’s Happening with the Supply Chain?
A simple explanation for supply chain issues would be to blame COVID, but it’s much more complicated than that. According to data collected by the Semiconductor Industry Association, in 2021, the industry shipped a record 1.15 trillion semiconductor components. This strong market continued into 2022, leading to a 3.3 percent growth in revenue to the highest revenue ever recorded of $574.1 billion. However, sales slowed significantly in the last half of the year.
These same factors influencing the semiconductor market also affect the whole electronics industry. Many more applications require electronic components, particularly “smart” ones for which integrated chips and semiconductors are required. High inflation and the continuing volatility of the supply chain have made supplies and prices challenging to predict. Many customers in the communications, data, or transportation industries conducting an electronic component search are placing orders months in advance to ensure availability.
How COVID Affected Electronic Component Searches
The need for electronic components shrank in 2020 as economies primarily shut down due to the COVID pandemic. Key to its effects on the electronics supply chain was the fact it started in Wuhan, China. While Wuhan has several electronics suppliers, China has been the largest exporter and supplier of electronic parts in recent years. This led to shortages of electronic components for integrated chips, automobiles, smartphones, and smart devices.
As the pandemic spread, supply chains were disrupted globally. Though this affected all electronic parts, lead times doubled for higher-end semiconductors to an over eight-month wait. When electronics manufacturers could produce, they prioritized components for the healthcare sector, as the need for diagnostic tools, medical devices, and X-ray machines rose dramatically. Yet supply chain problems continue to persist.
Why the Continued Problems with Sourcing Electronic Components?
Though initially electronic component searches were constrained by COVID, the industry had to then deal with recessionary pressures, inflation, and geopolitical crises. With the Russian invasion of Ukraine, the price of raw materials used for electronics, particularly neon, and palladium, rose significantly, with other sources hampered by the pandemic. China’s zero COVID policy through 2022 also contributed to shortages, though since the country opened up, electronic supply chains have begun to stabilize.
In addition to these factors, the rapidly expanding technologies of cloud computing, artificial intelligence, and 5G drove up demand, competing with other sectors for electronic components. Searching for analog chips, discrete components, field-programmable gate arrays (FPGAs), microcontrollers, and selective passive components still involves an over 40-week wait. Yet it’s looking like the second half of 2023 will bring some relief as production begins to balance with demand, partly because many countries’ economies weakened, easing demand that allowed manufacturers to clear backlogs.
Three industries, in particular, were most dramatically affected by shortages of electronic components. Searches for parts needed by the automotive, smartphone, and Internet of Things (IoT) sectors were directly influenced by electronics supply chain issues. These industries will continue to drive the electronic parts industry for the foreseeable future.
Auto Industry & Sourcing Electronic Components
The auto industry’s transformation has increased the sector’s need for advanced electronic components. Searching for reliable sources of automotive electronics will become increasingly important as electric vehicles (EVs) replace cars with traditional internal combustion engines. While conventional vehicles have between 2000-3000 capacitors, a single EV can require up to 22,000.
Cutting-edge electronic components in vehicles will increasingly need to support:
- Artificial intelligence
- Connectivity
- Electrification
- Embedded software
- Sensors
More costly than almost any other electronic component, searching for these types of auto parts shouldn’t be as tricky as those sought for other sectors, as suppliers prioritize them due to higher price points. Increasing US interest rates also slowed auto sales in the latter half of 2022. In December, however, the average new car price reached the highest ever, at over $46,000. Yet despite the currently elevated prices, it’s estimated that significant auto manufacturers lost $450 billion in sales through to the end of 2022, mainly because of semiconductor shortages.
While the industry is seeing reduced lead times for some of the most critical economic components, searches for them will remain challenging due to continuing shortages in computer chips, according to some auto executives. As the EV market grows exponentially, the ongoing economic uncertainty and geopolitical issues will remain a factor in sourcing essential automotive components well into 2023.
How the Smartphone Industry is Affecting Electronic Component Searches
Approximately 1.5 billion smartphones are made annually, with an estimated average of 1000 capacitors per phone. This means that manufacturers must then source suppliers for 1.5 trillion of just this one type of electronic component. Searches for multilayer ceramic capacitors must compete with smartphone makers, who use about half of the approximately 3 trillion of these capacitors made yearly.
The COVID pandemic and its shelter-in-place recommendations hit the smartphone industry hard, resulting in more than a 20 percent reduction in sales. This meant the makers of the capacitors also needed to decrease production temporarily while demand also slumped. 2021 saw smartphone sales rebound 5 percent over the previous year, driven partly by 5G phones that came out in late 2020. Yet the pandemic slump also resulted in many of those capacitors meant initially for smartphones going to other industries that needed them.
With economies slowing in 2022, sales estimates again dipped. This means that for now, there should be a sufficient number of this type of electronic component. Searchers will find these may even be oversupplied, so industries needing them shouldn’t have a problem finding multilayer ceramic capacitors, at least for the foreseeable future. With the deployment of 5G networks globally, however, telecommunications companies will also need this electronic component. Searching for multilayer ceramic capacitors may become difficult should their currently slow rollout speed up.
The IoT Angle
Another aspect relates to the need for electronic parts to support the Internet connectivity of the billions of IoT devices coming online worldwide. It’s estimated that 26 billion will be in use by 2026, with one out of every four needing wireless connectivity similar to smartphones. Research in 2020 by Parks Associates found that nearly two-thirds of US households with a broadband connection had an entertainment device connected to the Internet, while 30 percent had at least one smart home device. This isn’t even touching on the development of smart factories or the use of smart devices in the commercial or healthcare sectors. The increasing use of IoT technology for commercial, healthcare, industrial and residential applications will affect electronic component searches as demand for these parts increases.
The Road Ahead for Electronic Component Searches
Continuously advancing technology drives demand for semiconductors, along with many types of passive electronic components. Searching suppliers for these newer parts will become more complex until the market stabilizes. Still, it will likely change electronic parts manufacturers’ focus from less-profitable yet more mature markets. Distributors will also be less inclined to stock these legacy electronic components, as searchers will demand them less, and they’ll provide less profit for suppliers.
The sluggishness of global economies and supply and demand issues will keep supply chains unbalanced for the foreseeable future. Continuing geopolitical difficulties will also make it difficult to predict the availability of certain types of electronic components. Searching for some parts may become more accessible, while others may become harder to find. As such, supply chains will likely be unstable throughout 2023 and beyond.
Let Solid State Make Your Electronic Component Search Easier
For manufacturers looking for a particular electronic component, searching for the one you need can be a nightmare. Even before the pandemic, there were demand pressures for many electronic parts. Solid State Inc. can be a complete solution for sourcing any electronic component. Searching for parts made by Cooper Bussmann, Solid State Optronics, Orion Fans, and many other reliable manufacturers need not be difficult. We stock these and many other brands – some even have an agreement with Solid State to buy directly from their factories.
The professional sales team at Solid State understands how complex electronic component searches can be and how they can affect production, leading to longer lead times and higher prices. We can source critical components such as diodes, memory chips, multilayer ceramic capacitors, resistors, and transistors for manufacturers and other buyers of electronic parts. Our New Jersey warehouse is well-stocked with a full range of almost any imaginable electronic component. Searching within Solid State’s vast inventory will allow those sourcing parts to concentrate their energies elsewhere.
Solid State also provides add-on services that include:
- Decapsulation to expose the internal structure of an integrated circuit and verify the integrity of its design
- Electrical testing regarding functionality, parameters, and timing
- Product programming of IoT and other programmable electronic devices
- Restriction of hazardous substances (RoHS) according to EU directives regarding electronic components
- Re-tinning by dipping component leads into hot solder
- RoHS conversions from non-compliant parts
- Solderability test to ensure solders will stick to leads
- Tape and reel packaging of electronic components into carrier tape pockets
- Tin whisker mitigation techniques to help prevent electronic circuit problems relating to tin components
- Up-screening for device performance, including military specifications, temperature, and speed
Solid State works closely with third-party testing services for those we don’t do in-house. For those interested in either our services for electronic manufacturers or components within our inventory, we invite you to submit a request for a quote detailing your current needs.