Supply chain disruptions are part and parcel of manufacturing operations. Logistics network management is a multifactor, dynamic process that never ends. However, for some in the components industry, the current situation has gone well beyond the normal vagaries of supply chain management.
The Components Crisis Continues
Despite the best efforts of industry actors, the passive components industry is grappling with record high prices and yearlong lead times. For more than half a year, certain industries have faced chronic shortages.
A convergence of price-inflationary factors has led us here. Tier one suppliers are majorly retooling their production lines. As a result, the shift to Internet of Things technology and artificial intelligence is creating high mix, low supply environments. On top of it all, there are fears over the US-China trade war.
The effect some of these factors have on a business can be hard to understand in discrete terms. Just what is the price impact of the East-West commerce conflict on components at one’s company? However, one significant factor not mentioned above is also contributing to the current situation.
Contributory Factor: Key Raw Materials Face Shortages
When the price of raw material necessary for the production of a component goes up, that semiconductor’s retail price will also rise in accordance with how much of the material is necessary to its production.
Most mobile smart devices rely on nickel because they’re made with Class 2 and 3 MLCCs X5R, X7R, and Y5V capacitors. Nickel prices have risen since April 2016 due to rising global demand. In turn, that increase in demand has affected the price of the MLCCs reliant on the metal.
Similarly, Palladium nearly doubled in price from April 2016 to January 2019 and has only recently let off the accelerator.
MLCCs constitute the greatest area of use for palladium in the components industry. Various industries use the precious metal due to its tarnish and corrosion resistance and properties as a catalyst. Furthermore, Palladium’s rising demand from the jewelry industry only worsens component supply chain woes.
Ruthenium prices rose more than 550 percent from June 2016 to the present. TTI calls the necessity of Ruthenium for resistors “a weakness that threatens the entire high-tech economy.”
With their supply chain managers seeking out new vendors and reevaluating costs, it is incumbent upon corporate leaders to realize the importance of contingencies. Whether they hedge, invest, or seek third-party assistance to address their problems, companies in the components industry need to reshape the way they do business.