In 2021, there’s such a severe shortage of semiconductors that the automotive industry is set to lose more than $100 billion in sales because it can’t get chips. “Desperation” is a term that’s been kicked around.
For two decades the electronics supply chain has been minimizing the level of inventory in its pipeline via just-in-time (JIT), build-to-order (BTO) and lean. The goal is delivering the “right amount” of components to manufacturing lines just as they are needed. These parameters are determined by end-customers, largely OEMs and EMS providers.
Forecasting in the electronics industry is notoriously bad.
“The first time I get an accurate customer forecast will be the only time I get an accurate customer forecast,” one chip maker recently said. When demand for electronics skyrocketed at the beginning of the year, no one was prepared. The current chip shortage is expected to last well into 2022.
One of the constants in the electronics industry is components take between 16 and 18 weeks to manufacture. So, lead times -- the span between placing a component order and receiving it – are an indicator of how well supply is meeting demand.
Currently, lead times for a basket of electronic components -- both active and passive -- average 22 weeks, according to market intelligence firm LevaData, and for some products are stabilizing. “After experiencing a dramatic 2x to 3x increase in average semiconductor lead times over the last eight to 12 months, it appears that the situation may be shifting again. The delays are shortening or, in some cases, beginning to flatten at the least.”
In its most recent report, ECIA also noted significant easing on product lead times across all categories from July to August. Discrete semiconductors and capacitors remain under the most pressure. Some memory products are quoting lead times up to a year.1
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