Understanding Component Scarcity

Responding to the Global Component Shortage

For the past year, Pro-Active Engineering has been actively monitoring and working to mitigate delays caused by a Global Component Shortage. While we had hoped this component shortage would start to ease, we are seeing these shortages continue for the foreseeable future. Even components that have historically never had availability issues are vulnerable to this shortage. This document is not intended to cause panic but rather to alert our customers of potential problems and how to best avert potential delays.

What is causing this Component Shortage?

A multitude of factors have contributed to a “perfect storm” of conditions that have created a component shortage. A combination of a strong economy, increased demand, emerging markets, trade tensions, and decreased supply. 

Smartphones

While it is no surprise that smartphones rely heavily on passive components and flash memory, the increased complexity of smartphones has significantly contributed to the component shortage. To more illustrate this point, the best-selling smartphone on earth the iPhone 8 uses 125% more passive components than its two-year-old sibling the iPhone 6.

Smart Automobiles

Our vehicles are getting increasingly sophisticated with infotainment systems,  smartphone integration, electric cars, and the self-driving car have all significantly increased the demand of electronic components. 

The Internet of Things & Smart Home

Every appliance, heating & cooling system, automobile and smartphone networked and speaking to each other this is the Internet of Things. The Internet of Things give homeowners the ability to remotely control and optimize every appliance, every light, and every aspect of one’s home or business. 

Cryptocurrency
 

With the meteoric rise in the value of cryptocurrencies like Bitcoin adjacent industries have developed nearly overnight designed to cash-in on this new gold rush.  Graphics cards, DRAM & SRAM, DIMM Modules have all seen an exponential increase in both demand and price.

Other Significant Threats to Part Availability

Global Trade Tensions

Trade tensions and tariffs between America, China, the European Union and South America have sharply escalated increasing the price of raw materials while creating uncertainty and instability in the electronics global supply chain.  

Decreased Supply

After the Great Recession of 2008, component manufacturers were burned with large inventories and little demand. These suppliers have lagged behind the demand for components as they neither prepared for the rebound in the economy nor prepared for new and increased demand from emerging markets. 

componentsonpurple4 Ways to Avoid Slowdowns from the Shortages

1. List alternatives for each component on your Bill of Materials (BOM)

Because of the component shortage, when submitting your Bill of Materials, we recommend at least one alternative component for each item listed in the Bill of Materials. We propose listing two alternative components for every passive component as it gives our quoting department the best chances to avoid shortages and secure the shortest lead time for our customers. When including alternatives remember to verify that they are "active" and available for use. 

2. Better Communication helps avoid slowdowns

Quick responses to emails and phone calls are critical in avoiding slowdowns, ensuring quick-turn assemblies are completed on time and approving alternate component for the best price and lead time. As we already discussed in a blog entry, our internal records show that over 93% of Bill of Materials submitted for quotation contain at least one error requiring customer communication. After submitting a request for quote expect to be contacted with follow-up questions especially if the job is time sensitive, we recommend our customers provide their mobile phone to guarantee they are accessible.

3. Scrub your Bill of Materials for Long Lead Time & Obsolete Parts

One of our best weapons against manufacturing delays is our expertise in BOM scrubbing. Our quoting process begins with using the industry’s most advanced software SiliconExpert; capable of searching a database of over 1 Billion components and 15,000 suppliers to find alternatives for hard to find parts. With visibility on nearly every component and supplier, we are able to work with our customers on a granular level to best avoid shortages at time of quoting.

4. Securing Components with Distributors 

Our component bonding solutions have eliminated uncertainties many of our customers face. Pro-Active Engineering works with its customers to identify components at risk of shortage, and reaches out to their supply chain network and to put those components under contract reserving them for our customers. Our customers benefit from the peace of mind of avoiding the shortages and without having the upfront costs of acquiring all the components at once.

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What Components are Affected?

Passive Components
Multi-Layer Ceramic Chip Capacitors (MLCCs)
Other Capacitors
Resistors- Thick and Thin Film Chip Resistors
Inductors
Diodes
MOSFET
Transformers

Other Components Experiencing Shortages
NAND Flash Memory
DRAM & SRAM
DIMM Modules
Graphics Cards