How Component Shortages Affect Manufacturing and Assembly
Cars took on more electronics through 2017, and SMT resistors ran short in North America. The squeeze reached manufacturers far outside the auto industry, since almost every electronic device uses resistors.
Long before Hurricanes Harvey and Irma made landfall in August and September 2017, component shortages had put the electronics supply chain in rough water. Over the year, lead times for electronic components grew unusually long, as demand grew faster than many suppliers could make parts.
Many in the industry called it a perfect storm. Demand kept growing while capacity stayed where it was, so prices rose and wait times for parts stretched out.
How Demand Outgrew Supply
The automotive industry was widely seen as the cause. The growing amount of electronics in cars produced a supply imbalance of SMT resistors, at least in North America, EE Times Asia reported in September 2017, citing its sister publication EBN. Driver assistance, and eventually autonomous vehicles, could bring more shortages.
The shortage started with thick-film resistors and spread to thin-film parts. The average lead time for resistors rose from February 2017 through July, according to Electronic Components Industry Association data in the same report.
This was not a brief spike. The shortfall built through the year, and with manufacturers gearing up for holiday production in its final months, supply that was already tight came under more pressure.
The Impact Across Manufacturing
Automotive demand centered on certain parts, such as resistors, but the effect reached well beyond automotive. Almost every electronic device contains resistors, so manufacturers of very different products were competing for the same components.
The hurricanes added to that demand. Cox Automotive’s chief economist estimated that 300,000 to 500,000 vehicles could have been lost to Harvey alone, Fortune reported, and replacing them, along with flooded televisions and appliances, meant more demand for parts already in short supply.
Suppliers were also following demand for mobile devices and cloud computing. Server DRAM revenue at the three largest DRAM makers, Samsung, SK Hynix and Micron, rose 30.1% from the first quarter of 2017 to the second on tight supply, according to TrendForce. SK Hynix and Micron were shifting more of their output toward server DRAM, and TrendForce expected server DRAM supply to stay tight for the rest of the year. A December issue looks closer at the DRAM shortage.
Some major component makers announced plans to revamp their production lines for more flexibility and capacity, Sensible Micro wrote at the time. Those changes could help over the long run, but in the short term they added to the strain on supply.
The Impact on Component Users
Sooner or later, every design engineer has trouble finding a critical component, or a workable replacement at a reasonable cost. Component selection got harder in 2017, and so did planning against shortages.
Shortages also change what suppliers choose to make. A supplier can drop a whole part family to put its capacity behind faster-growing markets such as mobile, leaving a design without a part it was built around. All About Circuits warned in March 2017 that NAND flash makers could do exactly that as the mobile market grew.
Automotive Has Been Here Before
Parts shortages have hit carmakers before. In March 2011, The Wall Street Journal reported that analysts expected the U.S. auto industry to face sporadic production shutdowns for several months, because microchips and other parts were already scarce before Japan’s earthquake and tsunami.
In 2017 the auto industry was again at the center of a shortage, this time as the source of the demand: the electronics going into new cars were what pulled SMT resistors into short supply, as EE Times Asia reported.
Planning Around the Shortage
Growing lead times put production at risk. OEMs that ordered ahead, before lead times grew longer, and raised parts with their manufacturing partner early had a better chance to keep building. Kodiak alerts its customers early when a part on a build runs short and sources an approved alternate where one exists.