The global electronic component shortage – the causes

A global shortage of electronic components is impacting every electronics manufacturer across the globe. And this dearth of components is causing unavoidable production delays for customers the world over.

The effects of the worldwide electronic shortage are such that, without exception, manufacturers of any products requiring these components are unable to guarantee delivery dates to their customers. But what exactly is causing this unprecedented shortage of electronic components?

The main causes of the global electronic component shortage

The principal cause of the electronic component shortage is a global surge in the use of technology and electronic devices that require these components. This rapid increase is taking place at both consumer and industry levels.

The number of handheld electronic devices individuals use has grown extraordinarily over the past decade. For example, in today’s homes you are likely to find multiple smart phones, laptops, tablets, smart TVs and smart watches.

Breaking down this trend further, the rapid modernisation and urbanisation of major emerging markets, such as India and China, is playing a key role. For instance, the demand for handheld devices in India has exploded in recent years, to the point where now, on average, every male in India has two mobile phones. Based on an estimated male population of around 705 million, this equates to 1.4 billion devices.

Additionally, the use of electronic devices by manufacturers across the industry spectrum, in particular in sectors such as defence, automotive and aerospace, continues to rise at an incredible rate in response to advances in technology.

Continued growth in demand

This growth, at both the consumer and industry levels, is set to accelerate over the next 10 years. A key driver will be the Internet of Things – the continued trend for connectivity will increase demand for the technology that enables devices to connect, collect and exchange data.

The rising popularity of electric vehicles is also set to fuel demand for electronic components. The recent announcement by British technology company Dyson that it will start building electric cars is illustrative of this trend. Notably, it will do so in Singapore, primarily because of the country’s proximity to high-growth markets in Asia, where demand for new technology continues to soar.

How component manufacturers are responding

A change in component production activity in the past decade is another important factor behind the global shortage. Following years of falling prices for many components and the subsequent impact on profitability, major manufacturers reduced investment and component production. This downsizing of output has exacerbated the impact of the sharp spike in demand for these components.

Component manufacturers are responding to the global shortage by increasing production capacity. However, at present, there is a clear focus by a number of major manufacturers on more profitable components for new technology and devices, rather than on less profitable components for devices that have been around for 20-30 years. While this forward-looking strategy is understandable, there is still very significant demand for these less profitable components.

How MPE is managing the situation

The global shortage of components is set to continue into next year. It may well take until the end of 2019 for component manufacturers to catch up with demand.

As a result, even contract electronics manufacturers that have traditionally held a large stock of components, such as MPE Electronics, are being affected. Component suppliers are constantly putting back delivery dates, affecting printed circuit board (PCB) and product assembly, and this makes it very difficult to give customers accurate delivery dates. No one is exempt from the delays.

Given the difficult conditions, clear and consistent communication with customers is imperative. This is a priority for MPE and, to this end, we have implemented a two-part order acknowledgement system, comprising a target delivery date and a confirmed delivery date. This allows us to be absolutely clear with our customers about when they are going to receive their orders.

Find out more about MPE’s contract electronics manufacturing services by contacting us on 01825 764822 or info@mpe-electronics.co.uk or visiting www.mpe-electronics.co.uk.