Will diversifying your supply chain solve the issues that come with the global semiconductor shortage? Not entirely—but diversifying your supply chain can absolutely help you optimize your supply chain and even secure hard-to-find or obsolete electronic components during the semiconductor shortage.
As much as we all hope the supply-demand struggle will come to a swift end, it doesn’t seem to be in the cards at the moment. Industry experts don’t see a means to an end anytime soon. Why? Semiconductor and other electronic component supply-chain vulnerabilities are linked to four ongoing factors:
1. The United States has an overreliance on China. Immediately after China hit a bottleneck in late 2018, the US started to feel the effects. In fact, production outages in China affected various industries around the world—including automotive, pharmaceuticals, electronics, and consumer goods—leading several countries to reevaluate their supply chains. While a few of the biggest tech companies in the US have multi-billion-dollar plans to open factories on US soil, those plans are not coming into fruition any time soon.
2. The COVID-19 pandemic. Along with a huge decrease in the supply of electronics due to bottlenecks, factory closures, and lack of manpower, the COVID-19 pandemic has also exponentially increased the demand for electronics due to work-from-home and school-from-home. Lead times are increasing and the availability of certain electronic components are dwindling.
3. Technological advancements. When a company comes out with a product upgrade (take Apple and its newest iPhone for example), the product requires either additional semiconductors or newer/higher functioning components. Either way, technological advancements have a seismic impact on semiconductor demand.
4. Increased demand for electric vehicles. Electric vehicle sales are expected to have a compounded annual growth rate of 29% through 2026, according to industry analysts. Because semiconductors are responsible for the function of vital components in the vehicle like safety sensors, brake systems, and driver assistance technology, the demand for semiconductors also increases. Note: more information on how the rise in electric vehicles impacts the semiconductor industry can be found on our blog.
While the semiconductor shortage is not going to resolve anytime soon, a supply-chain disruption like this one with such wide-ranging implications should serve as a use case to prepare for future events. What can you do to ensure you can acquire as many parts as possible during this crisis? Diversify your supply chain.
Diversifying Your Supply Chain
Much like the US’ overreliance on China, a company can gain an excessive dependence on one supplier for semiconductors and other electronic components, leaving them vulnerable as supply runs low. Supply chain diversification enables flexibility. You can easily diversify your supply chain by partnering with an authorized distributor who has official permission to sell a manufacturer’s products. When you choose an authorized distributor, you unveil a vast network of original component manufacturers (OCM) as authorized distributors have direct access to manufacturer supply lines across various industries.
At Area51 Electronics, we have access to hundreds of manufacturer lines that can fulfill your supply chain needs in the energy, automotive, industrial, medical, aerospace, and automation industries, while also carrying the advantage of being an independent distributor. As an independent distributor, we carry obsolete, end-of-life (EOL) verified components—a vital aspect of a distributor especially during this critical time. Our independent distribution line consists of two channels:
1. Our own inventory.
2. Our collaborative network of suppliers; which includes original equipment manufacturers, contract manufacturers, and other distributors from different parts of the world and different ends of the supply chain.
This unique collaborative approach (having both authorized distributor and independent distributor lines) provides us access to a large network of manufacturers and suppliers at a time when companies need all the electronic components they can get. Utilizing both of Area51 Electronics’ distribution lines, will help you optimize and diversify your supply chain so you are better prepared for today’s semiconductor shortage and any future challenges. Contact us today and see how we can help you accomplish your supply chain goals.