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Risk of Electronic Component Shortages May Loom Ahead, Pasadena Company Warns

Published on Thursday, August 24, 2023 | 5:59 am

[Photo courtesy: Supplyframe]
Buyers of electronic parts are now getting better deals than a few years back. But Supplyframe, a Pasadena-based company that supplies what it calls “the world’s richest intelligence resource” for the electronics industry, is warning that beginning next year, those buyers may face problems getting the parts they need when more people want them. 

A report by Supplyframe says the electronics component market is expected to remain stable for the rest of 2023, with most prices and lead times declining or staying flat.

The report, based on the company’s Commodity IQ Demand index, shows that the electronics supply chain has recovered from the disruptions caused by the pandemic and the trade tensions between the U.S. and China. It also says the recovery is uneven across different industry segments and components, and some risks remain for 2024 and beyond.

Steve Flagg, Supplyframe CEO and founder, explains that if more people suddenly want electronic parts, it might become difficult to find good prices and enough supply. 

“The electronics supply chain will remain a buyers’ market into 2024,” Flagg said. “But given the uneven demand recovery across industry segments and electronics components, continuing macroeconomic volatility, and some raw material price increases, any swift uptick in component demand will threaten the ability of sourcing organizations to calibrate cost negotiation with continuity and assurance of supply.”

The report highlights that just over half of all lead time dimensions, including solid-state storage devices, are declining in the third quarter of 2023. Most lead times, which is the time it takes from ordering a part to getting it, will continue to fall in the second half of the year, except for some integrated circuits that are still facing shortages, the report said.

The pricing surges that began in July 2020 have also diminished, with electronics component prices decreasing by 5% from the first quarter to the third on average. 

Looking ahead, the report predicts that around 76% of passive and 48% of semiconductor prices will stay the same for the rest of 2023. But for certain integrated circuits, prices will remain high, and they might go up even more in 2024 due to increased demand.

Supplyframe’s report also shows that electronics component demand recovery has begun, though it remains uneven by end market and application. According to the Commodity IQ Index, month-on-month demand declines contracted in July globally and in the Asia-Pacific region. China, including Hong Kong, saw a positive month-on-month demand growth of 2.6% in July.

Supplyframe expects the demand recovery to continue in the coming quarters, driven by strong growth in the automotive, industrial, medical, and consumer electronics sectors. But the report also warns that the demand outlook is subject to uncertain factors, like new variants of Covid-19 emerging, geopolitical tensions, environmental regulations, and inflationary pressures.

Supplyframe’s report is advising buyers to adopt a proactive and data-driven approach to sourcing and procurement, leveraging market intelligence and analytics tools to optimize cost, quality, and risk management. 

The report also suggests that buyers should diversify their supplier base, monitor supply chain trends and signals, and collaborate with suppliers and internal stakeholders to ensure supply continuity and resilience.

Supplyframe’s Commodity IQ Index is one of the company’s pioneering Design-to-Source Intelligence (DSI) solutions that businesses use to design, source, market, and sell products across the global electronics value chain.

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