IoT boom leads to widespread shortage of passive and semi-components

Demand for chip resistors is growing due to the rapid growth of the Internet of Things (IoT), the heavy use of consumer electronics and the trend towards more sophisticated safety and infotainment systems in automobiles. Automotive, mobile device and factory automation applications are all driving demand. As a result, manufacturers in these industries are paying additional premiums for items that have traditionally remained stable at less than a penny per piece.

OEMs are scrambling to find new sources of supply for these normally easy-to-find parts. Fusion Worldwide, a large independent distributor of electronic components, has reported a significant increase in requests for quotations (RFQs) for resistors over the past two months. past year. In addition, electronics distributors have seen a 200% increase in demand for capacitors in recent months, driven by demand for mobile phone components.

According to Tobey Gonnerman, Executive Vice President of Fusion Trading, the affected markets are vulnerable to this shortage, as demand in these sectors has simply increased. In addition to passive components, the boom in the Internet of Things and the heavy use of consumer electronics, as well as the trend towards more sophisticated security and infotainment systems in automobiles, are placing higher demands on certain memory products, particularly NAND Flash and RDIMMs.

Gonnerman told EBN: "Ours and all the devices we use are becoming more and more digital, so manufacturers are racing to keep up."

With regard to price premiums, there is no clear trend, Gonnerman said, "Manufacturers are paying some premiums as they try to get their end products to market quickly." "For passive components, we have recently found premiums of 300 to 800 per cent for low-cost components

But how long will the shortage last? Although there will always be some degree of shortage, current component prices are expected to continue to rise due to the ebb and flow of the market. Memory is also expected to increase due to planned price increases. Overall, it looks like there is still a long way to go.

Unfortunately, Gonnerman says the problem has shifted to other product areas as shortages persist between several different product groups. Many of these are driven by a surge in demand for products other than capacitors, thick film chip resistors and memory products, other board-level components (including transistors, logic devices, application-specific integrated circuits (ASICs), and programmable logic devices (PLDs).

On the bright side, independent distributors like Fusion are helping customers.

We're their Swiss Army knife when they need it, and given the recent shortages, we've even seen customers we've never worked with before turn to us and other independent distributors," says Gonnerman. and therefore commodity manufacturers are unable to obtain the parts they need. This reality ensures the need for distributors.

Of course, those in the affected industries must wonder whether the surge in demand and lack of available products will lead to poor purchasing decisions. according to gonnerman, it is impossible to predict exactly what will happen. However, experienced participants usually do a good job, thanks to historical knowledge, in order to better anticipate and retain parts availability as well as additional ordering.

Gonnerman says: "Emerging players, on the other hand, encounter more problems simply because they are inexperienced with the ebb and flow of the supply chain."

The picture is not all dark. Distributors have learnt from past shortages. At the recent ECIA Executive Conference in Chicago, Nick Hawtrey, chief financial officer of Allied Electronics, said lead times have caused huge problems among manufacturers in the past - largely due to overreaction - leading to higher prices.

"I think we are better prepared than we have been in the past," Hawtrey said. "We need to look at capacity in relation to capex (capital expenditure). We have to make sure we don't create artificial shortages. Some companies have killed it because they've invested a lot of money in inventory. It's all about managing the supply chain more effectively than in the past."