We’re now into the second half of 2021, and life is slowly starting to get back to normal. In England, we’re just a few days away from nearly all Covid-19 lockdown restrictions being lifted.
But for the electronics manufacturing industry, getting back to ‘normal’ isn’t so simple.
Here is the latest quarterly roundup of key developments in the global electronics component market. What does the rest of 2021 have in store for our industry?
As many countries try to ‘re-open’ and learn to live with COVID-19, unfortunately the consequences of the prolonged safety measures put in place are still being seen throughout global supply chains. We must remember that although the UK and some European countries are making excellent progress with vaccination rollouts, other regions are still battling outbreaks of mutant variants and lower vaccination rates per capita in comparison.
Malaysia reinstated their movement control order (MCO 3.0) nationwide on 10th May 2021, lasting from 12th May – 7th June 2021. On 28th May 2021, it was announced that this would be extended to a total lockdown, followed by a further announcement of a second extension soon after.
Semiconductor fabrication plants are still not able to maintain enough output to catch up with previous backlog, and with ongoing raw material shortages, they are struggling to meet the current global demand leading to worsening global shortages and allocation issues. A wide variety of industry sectors and products are suffering including automotive, construction, FMCG, 5G networks, mobile phones, games consoles, toasters and laptops.
Capacity and lead-time issues
- Global supply chains have been severely restricted and product availability is limited at best – this relates to all product, manufacturers, commodities, and sectors. Customers are advised to forecast at least 18 months out and provide firm scheduled orders wherever possible to allow EMS providers to secure a place in the ‘allocation queue’ with component manufacturers and franchised distribution. Many component manufacturers are already reporting being at full order book capacity until the end of 2021.
- The Ever Given which ran aground in March 2021 and was then impounded by Suez Canal Authorities has finally set sail again to complete its onward journey.
- Following a fire at the Renesas’ Naka plant, Renesas announced late June 2021 that they had regained full operational capacity in their N3 building. Pre-fire levels of production are anticipated from around 3rd week July 2021.
- JST items remain on lengthy lead-times with anywhere between 40 and 52 week being quoted through franchised distribution.
- It is being reported that a large number of Allegro Microsystems parts are on allocation.
- Cirrus Logic lead times are extending on most devices and product ranges.
- ISSI have little stock of 2D NAND die with shortages expected to continue throughout 2021.
- ST Microelectronics MPU’s are on allocation with MCU’s close behind, particularly the STM32 and STM8 product families.
- Xilinx are not allowing any expedite requests on orders placed.
- The AKM factory fire at the end of 2020 is still having a knock-on effect with Abracon recently releasing a statement summarising the impact the fire has had on their own supply chain and product availability. AKM advised in November 2020 they do not expect recovery until 2022.
- ST Micro, ON Semi and Diodes Inc. discreet products are all being quoted with lengthy lead-times with many in excess of 46 weeks for new orders.
- Malaysia’s enhanced MCO 3.0 extension will reportedly cause supply disruption of MLCC’s from the likes of Walsin and Taiyo Yuden, Electrolytic Capacitors and Potentiometers for Panasonic. Bottlenecks for On Semiconductor in their probe, test, packaging and assembly lines and the total closure of Bourns at Seri Kembangen/Kuala Lumpur are impacting shipments of magnetic components.
- In May 2021, Swiss owned EMS provider ESCATEC strategically acquired JJS Manufacturing in full, helping to expand ESCATEC’s global footprint and manufacturing capabilities. The combined electronic and electro-mechanical offering, along with facilities in Malaysia, Switzerland, UK and the Czech Republic help support aggressive growth plans the group is focussed on.
- MKS Instruments are set to buy Atotech in a $5.1b deal.
- Micron have agreed to sell their Utah Fab to Texas Instruments reportedly worth $1.5b.
- Yageo will acquire all outstanding shares of Chilisin Electronics Corp with the transaction expecting to close on 20th December 2021.
- ST Microelectronics announced an agreement with Tower Semiconductor whereby Tower will utilise STM’s Agrate R3 300mm Fab under construction in Italy.
- Dutch semiconductor manufacturer Nexperia plans to acquire Newport Wafer Fab (the UK’s largest chip Fab) for £63M.
- Chip maker Xilinx will acquire Silexica (provider of C/C++ programming tools) broadening the Xilinx developer base.
- Prepreg and copper-clad laminate are still in short supply; this is driving prices higher and extending lead times. Due to an increase in demand of PCB’s we have seen copper foil pricing increase by over 30% this year.
- Epoxy resin is in short supply and is also subject to price increases.
- Raw material prices are continuing to rise with an upward trend in almost all global commodities supporting the EMS industry including copper, resin, aluminium and steel.
- Bulgin applied 3.8% increases in April 2021 to their products.
- Wurth applied a blanket 7% portfolio increase during April 2021.
- Lapp prices have increased due to continually rising copper costs.
- ADI have added an average of 15% to their ‘vintage’ portfolio.
- ABB applied between 5% and 13% price increases to some items in May 2021.
- Eaton price increases have risen by at least 4%.
- Myrra product has increased by around 8%.
- LEDs are expected to increase in price by 3%-4% across the commodity including panels.
- Alliance Memory is expected to have a price increase during Q3 of 2021.
- NXP applied a portfolio increase on 1st July 2021.
- Abracon and Kyocera are suggesting price increases are on the horizon, stemming from the AKM factory fire last year.
- Oil pricing has climbed steadily since November 2020 and is $73.36 per barrel at time of writing.
- Gold has increased by over 3% during the last quarter with pricing now at £1,319.60 per ounce.
- Silver pricing rose during May 2021 but has started to fall since min-June 2021 and at time of writing is £19.25 per ounce.
- Copper pricing has been climbing all year but has been subject to some fluctuations over the last quarter and is still showing an upward trend overall. At the time of writing, pricing is $9,451.50 per tonne on the LME.
- Steel rebar rose sharply in May 2021 then fell a little but not back to April 2021 rates. At time of writing pricing is $745 per tonne.
The electronics component market is still in a state of flux. Raw material shortages are ongoing, with diverse industries feeling the strain. And with many component manufacturers at full capacity until the end of the year, forward orders will be critical for securing product into 2022.
In good news though, there have been some exciting things happening within the industry, with the strategic acquisition of JJS Manufacturing by ESCATEC. We’re excited about how this will help us to better support our customers, especially while navigating the ongoing challenges the industry is facing.