In this article, we will talk about the importance of semiconductors and PCB’s, the challenges this shortage is causing manufacturers, most importantly, how companies can mitigate the issue.
The shortage, dubbed “new oil” by an industry expert as it echoes the U.S. energy crisis of 1970-1973, will cause affected products to increase in price by 3%. U.S-based manufacturing of electronics has sharply declined, while Asian countries have greatly increased their capacity over the past ten years. Intel CEO, Pat Gelsinger, recently told Bloomberg.com that this shortage would last at least two years.
Before moving to these details, let’s quickly of the electronic components and their benefits.
What Are Semiconductors and Printed Circuit Boards?
A semiconductor is a physical component designed to manage and control current devices and equipment. This component controls otherwise freely flowing electric currents or completely repels the current. These are used to develop electronic chips, handheld devices, and computers and are usually made from germanium and silicon materials.
On the other hand, Printed Circuit Boards are the materials that hold semiconductors and other electronic components together. Without the PCB, electronic components inside computers and phones would be disorganized and take up much more space. All the required electronic components are added to the board, and etching is performed to attach all parts to the substrate. This arrangement allows the current to pass through copper from one component to other.
Here’s a great video describing How Semiconductors Work.
Here’s a video about How PCB’s Work.
Global Electronics Shortage Roots
Carmakers are slashing their production, PlayStation and gaming accessories are hard to find, a new hike in the prices of computers is ahead; why is this all happening? The global shortage of critical electronic components is indeed impacting all of us, including local companies who rely on these to produce their products.
All these products have one thing in common: semiconductors, PCB’s and related components. The scarcity of electronic components has been building for months, with no relief in sight. This harms businesses directly or indirectly involved in trade with semiconductors.
The reasons for the shortage is multifaceted, including the US-China trade war, COVID shutting down key manufacturings companies, and a spike in demand for products such as video game consoles, smartphones, and other electronic devices bought by consumers stuck at home. As the entire globe entered stay-at-home orders, demand for handhelds, TVs, and electronic games soared to record demand. Currently, the U.S. is seeing a surge in consumer spending due to stimulus check spending and overall economic optimism. Meanwhile, the virus is surging in less-rich countries where our components are manufactured, and vaccines are scarce.
How Manufacturing Leaders Can Minimize the Problem
The shortage of critical components is here to stay, and there’s a good possibility the supply will decrease in the months ahead as our economy quickly rebounds. Here are several solutions that can minimize the current threat to your production lead times, delivery timetable, and company profits:
Secure Domestic Sourcing to Provide Short-Term Relief
While more costly, manufacturers can source from U.S. component manufacturers in the short term to manage demand. As prices are generally expected to increase for a wide variety of goods this year, companies may be able to increase their price for products to offset these additional costs. Shifting focus to U.S. manufacturers, and diversifying your supply base will reduce your reliance on a few Asian suppliers.
Improve Insights into supply chain Intelligence
Like other business areas, improvements in data reporting and forecasting are critical to plan for future shortages. Whether you’re using fundamental data gathering tools or have AI intelligence platforms, considerations should be taken to improve your line of sight for opportunities and dangers ahead. Setting up your reporting systems and using current tools will greatly enhance your ability to meet fluctuations in your supply chain. Data tells a story and using historical data and real-time info for early predictors of supply issues will be critical in navigating the current chip component issue.
Modify Just In Time to Just In Case Inventory
While JIT inventory is very efficient and less expensive, it’s advantageous to companies to have a stockpile of critical supplies such as electronic components. Part of the JIC model includes having trusted, local supply partners to utilize when needed. This requires strong collaboration with your company and the suppliers. Although difficult to manage, especially with ever-changing technology, this JIC model can elevate current supply issues. This method is risky and requires constant management and accurate demand forecasting to ensure supplies are available yet not tieing up your assets in unwanted inventory.
Complete Regular Supply Resilience Assessments
Taking a big-picture view of your supply operations is more critical than ever. Instead of an annual review, companies need to stay much closer to their supply chain. Having quarterly department reviews to critically look at opportunities and threats to your chain is more needed than ever. Asking your team about current and future impacts will give you time to be strategic versus react at the moment. Staying in regular communication with your most critical suppliers will help improve this assessment and allow you to be most informed on changes. If quarterly reviews are not giving you a good pulse on your supply, consider having even more regular reviews will all parties to get the best picture available.
Industries involved in manufacturing electronics are now desperate to engage in talks with their government officials for non-disruptive supply chains and raw material. Although routes are now opening and international transportation has also become operational. Still, there is a vast gap for semiconductor industries to reach out to their previous production capacities and eliminate all shortages.
Insights
Semiconductors and PCB’s are one of the most significant building blocks of U.S. products. With a considerable share in the global gross domestic product (GDP), semiconductors have become the need of almost every industry associated with our economy, affecting many Midwest companies.
There is a crisis for the semiconductor and electronics industries in recent days may be around a while. Companies that take a critical look at their sourcing operations will prosper over time and navigate the current difficulties for the long term.
Tom Goettl, VP at Konik, writes about career and leadership topics for architecture, engineering, and manufacturing sectors. Connect with us on LinkedIn.