Component Shortages Persist Despite Waning Demand

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The widespread electronic component shortages that were prevalent during the COVID-19 pandemic have eased in recent months as demand has fallen for many parts. But according to the latest monthly update from TechPoint, a supplier of electronics manufacturing and supply-chain services, long lead times persist for some parts, and current manufacturing capacity remains constrained.

According to the report, inflation and the decline in disposable income have combined to lower demand for many products, which is in line with recent predictions of easing component shortages. But while earlier reports suggest prices have stabilized, TechPoint noted that high raw material costs and keeping component prices high, and there’s evidence some part prices could increase.

For instance, TechPoint noted that raw material prices are keeping passive part prices from falling despite the fact lead times have fallen for standard parts. The firm noted passives demand could pick up again when the industry recovers. This, coupled with the fact that many assemblies require significant numbers of passives, could strain existing production capacity.

Specialty Parts Stay in Short Supply

For parts such as electrolytic, hybrid capacitors, and special-purpose resistors, the long lead times of the past few years have not gone away. In a similar vein, parts for automotive applications remain in short supply, as that industry struggles to keep up with demand for new vehicles.

Component Lead Times

  Source: TechPoint

OEMS Penalized for Cancelling Orders

Parts for embedded systems and servers, including microcontrollers, microprocessors, and FPGAs, have seen reduced global demand for goods made in China. TechPoint said lead times now average 22 to 26 weeks, though it varies on the manufacturer. But manufacturers that have struggled to keep up with demand are taking no chances, imposing stringent regulations on order cancellation and parts returns for distributors and customers. Also, a backlog of manufacturing remains, particularly in Europe, the Middle East, and Africa.

In analog and memory components, TechPoint noted that production costs remain high due to the combination of inflation, heightened costs, and declining disposable incomes. Price reductions are unlikely due to the costs of investment needed to improve capacity.

For interconnect and mechanical components, TechPoint said that connector inventories were increasing with an average lead time of 10 to 20 weeks. However, lead times for relays are around 30 weeks, and raw material prices are likely to keep prices for these parts high.

Raw Material Price Trends

Source: TechPoint

TechPoint noted that manufacturers are making fab investments spurred on by both the European and North American Chip Acts, to reduce the reliance on fab capacity outside of Taiwan.  While the onshoring boom is underway, the new or expanded plants won’t come online until later this decade. A bounceback in electronic component demand could challenge the ability of manufacturers to meet any near-term appreciable uptick in demand.

Spencer Chin is a Senior Editor for Design News covering the electronics beat. He has many years of experience covering developments in components, semiconductors, subsystems, power, and other facets of electronics from both a business/supply-chain and technology perspective. He can be reached at [email protected]