How SMEs can address the automotive electronic components shortage

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Infineon purchases Cypress Semiconductor in billion dollar deal
Image: Infineon

One of the most frustrating aspects of the coronavirus pandemic is its persistent and highly unpredictable nature.

For example, earlier this year, regional governments temporarily shut down local manufacturing to halt the spread of COVID-19. Most electronic component makers resumed normal production months ago, but the stoppage is negatively affecting the global automotive sector. Reuters recently reported that Volkswagen believes a pandemic related part shortage will disrupt its Chinese vehicle manufacturing operations.

NXP Semiconductors and Infineon Technologies also admitted the supply chain bottleneck is affecting their operations. Nevertheless, small and medium-sized enterprises (SMEs) can mitigate the effects the automotive electronic component shortage has on their businesses if their leaders act quickly.

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Yesterday’s Disruption Causes Tomorrow’s Interruptions

Volkswagen maintains 33 manufacturing facilities in China to serve the world’s largest automobile market. The corporation’s production lines use cutting-edge electronic components to power its fleet. Unfortunately, the firm is struggling with part stockouts because of semiconductor manufacturing stoppages caused by the coronavirus pandemic earlier this year.

The automaker told Reuters that COVID-19 constrained electronic components availability might lead to “potential interruptions” in its Chinese vehicle output. The corporation mentioned the situation had become “critical” as the nation’s auto market has rebounded from the outbreak’s initial impact.

Since the global supply chain is interconnected, the component shortage is disrupting more than one large company.

Global car part vendors Bosch and Continental told Reuters they are also struggling with semiconductor availability. The former stated, “no supplier can elude this market development.” The latter mentioned that despite its partners’ efforts to increase their output, electronic components scarcity could extend into 2021.

The news agency also spoke to an unnamed industry insider who expects the automotive semiconductor bottleneck to affect all carmakers operating in China to varying degrees.

Chipmakers Respond to Auto Component Shortages

Infineon and NXP have taken decisive action to address the shortage that affects their core businesses.

Infineon declared it is dedicating more of its financial resources to establishing a new plant in Austria. The German chipmaker said it prepared for an increase in demand from the vehicle sector next year and adjusted its production output accordingly.

Along similar lines, NXP notified its clients of the vehicle chip shortage and a “significant increase” in raw materials costs. The Dutch corporation said it would increase pricing across its catalog to compensate for the problem.

Like the pandemic itself, the automotive semiconductor shortage it caused will ultimately be temporary. Barring any additional production delays, Infineon and NXP should be able to overcome their shortfalls by the middle of next year. But in the meantime, the two corporation’s offerings may be unavailable or more expensive than expected.

How Can OEMs Deal with the Vehicle Component Shortage?

Unfortunately, SMEs awaiting shipments or looking to order vehicle electronic components may not be able to conduct business as usual. However, leaders still have options available to help them realize their near-term objectives.

If one provider is out of a certain item, firms should determine if an alternate vendor sells a suitable replacement. Companies could also place a part order with a just-in-time manufacturer to ensure their projects meet their production schedules.

SMEs could look to an e-commerce electronic components marketplace like Sourcengine to find the parts required to complete their new product introductions.

The platform enables SMEs to make purchases from over 3,00 traceable vendors worldwide, including many indirect suppliers. The service also offers a BOM tool that enables firms to upload their spreadsheets and receive active offers for mission-critical parts. In addition, Sourcengine lets SMEs arrange multiple deliveries for different locations to keep their global production lines humming.

The unpleasant reality is the coronavirus pandemic will continue destabilizing global industry in 2021 and beyond. As opposed to prior worldwide disruption prompting events, COVID-19 related volatility has no clear point of resolution. However, SME leaders can utilize cutting-edge methodologies to make their companies more flexible in the face of a systemic crisis.

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