As we endeavour the second quarter of 2021, we discover the overall market situation has not changed for the electronics manufacturing industry.
Although, the rest of the economy is edging closer to the highly anticipated ‘new normal’, we unfortunately are still facing strong market demand, with a growing backlog and no relief in the lead time reduction.
Here is the current overview of our market after Q1, and our expectations for Q2, and the remainder of 2021:
Since the start of 2021, the market has changed dramatically and ongoing strong demand continues to outstrip supply, perpetuating very long lead times and continual review of pricing by manufacturers.
With the UK and Northern Ireland economy giving dates to reopen, restrictions slowly beginning to lift and the successful rollout of the vaccination, the same cannot be said for the manufacturing world.
Although the UK and NI are now seeing some positive recovery from the pandemic, Europe is amidst their third wave of the virus, with continued and extended lockdowns and curfews in place in France, Italy, Belgium, Spain and Czech Republic.
Lead time issues and component shortages
- We are seeing no relief in lead time reduction, the ramp-up in demand continues to drive further increases in lead times across entire portfolios resulting in wafer and substrate shortages and allocation on some products.
- There has been continued acceleration in demand from customer bases across all Discrete & Optoelectronic Technologies.
- The drastic supply situation has been further compounded by natural phenomena such as freezing temperatures in Texas, where many manufacturing plants are located, or accidents such as the fire in the Renesas factory in Japan.
- Taiwan is currently suffering the worst drought the country has seen in over 50 years. Due to heavy backlogs, there is a real danger of further issues due to drought which has the potential to cause allocation on memory lines fairly soon.
- Supply constraints are now across all manufacturers, all products, and all sectors. This is no longer limited to the automotive sector, semiconductors or specific manufacturers such as Microchip. It is critical for supply chains to have full visibility of customer demand to allow order schedules to be placed out to at least Q4 2021. This is anticipated as lead times from most suppliers are being pushed further out due to various factors; over forecasted demand, sea freight, constraints on raw materials and factory closures due to COVID 19.
- Lead-times for both onshore and offshore manufacturing are extending. The Chinese economy is still recovering from the damage of COVID-19 and demand is outstripping available capacity in the Far East, pushing more builds into Europe and the UK.
- Manufacturer price increases are frequent and often multiple increases are being observed over many weeks. This is a global issue, affecting all products, commodities, manufacturers and supply chains.
- Raw materials and transportation costs being the main driver for these costs increases and we are expecting to see even further price increases throughout Q2.
- Shortages of copper-clad laminate continue which is pushing prices up globally and extending lead-times for the material.
- We have seen a decrease in the price of Gold since January 2021, while silver remains relatively stable. On the other hand, copper is on an upward trend.
- As well as laminate availability and pricing, PCB manufacturing is also reliant upon copper, silver, gold, aluminium, lead, tin and nickel and these raw material prices are increasing globally.
Despite extremely challenging times, we believe there are signs of improvement. Current shortages of raw materials may improve leading to stabilization of lead times in the second half of this year.
And a ramp-up of investments to boost production capacity will help in the longer term. We can sense the light at the end of the tunnel but there is still a way to go. Order scheduling will be crucial for all customers for the remainder of 2021 and into 2022.