As the coronavirus continues to engulf the global electronics industry, raising further concerns around component shortages, Russell Parr, marketing director at Prime Light, explains how European suppliers are preparing for any potential disruption to supply.
The electronics supply chain is no stranger to testing times, from the recent US-China trade war, supply base consolidation and constrained supply for some parts. However, the emergence of Covid-19 and the subsequent halt in production in the wake of the outbreak, has presented a new wave of challenges for electronics market – particularly for manufacturers buying finished or sub-assembled products from the China region.
Businesses who have traditionally relied heavily on imported products from the region have in recent months faced critical component shortage, as the outbreak ripples through global manufacturing supply chains following factory closures.
In fact, as of the beginning of March many Chinese factories had only just resumed production after a lengthy halt to production. At its peak, more than 80pc of the country’s manufacturing industry closed, rising to 90pc for exporters1. Whilst Chinese vendors increased component prices by 2-3% due to supply shortages triggered by factory shutdowns2.
And with assembly lines anticipated to take longer than expected to restart as companies scramble to get Chinese factories fully operational again – amidst reductions in workforces as staff remain in self-isolation – output is likely to be more limited, posing further trials when it comes to lead times for many components.
Could Europe hold the key?
As the coronavirus pandemic spreads to new epicentres in Europe and the US, companies are working hard to mobilise a suitable response to the now global crisis.
While there are certainly no easy answers, due to the volatility of the disease, and the, as yet, unknown extent of any potential impact on component production, European manufacturers could hold the key to alleviating worldwide shortages in LED and other lighting components.
There remains concerted effort amongst European based suppliers to mitigate any component shortages from China and the surrounding regions, while many have now put processes in place to limit any impact as the highly contagious virus spreads into Europe.
European suppliers, for instance, have increased stock levels since Italy went into lockdown, in turn, generating excess electronic component inventory for the market.
Clearly each local situation differs significantly, but for UK-based Prime Light, working with European suppliers has enabled the company to limit the likelihood of any supply shortages, or indeed international trade issues, as almost all components supplied are manufactured in the UK and Europe.
Faced with increased uncertainty in the market, and growing concern amongst electronics manufacturers, it is a strategy that could limit any potential impact on supply, predominantly across the UK. By working closely with European suppliers and customers to minimise any disruptions, companies should be able to fulfil orders and limit any potentially costly interruption in supply.
No short circuit
While the primary concern for any organisation is the welfare of its workers in such uncertain times, with many major electronics companies having component manufacturing and PCB assembly facilities in China, the impact of Covid-19 has understandably posed many questions for the industry.
In fact, as of 16 March 2020, nearly 40% of electronics manufacturers feel worse about the impact of Covid-19 on their business than they did a month ago, according to a recent survey by electronics industry trade group IPC3. While, more than two-thirds of respondents said they have been told by suppliers to expect some shipment delays, and some of the delays are growing.
Although the full extent of any potential impact caused by the outbreak is still to be determined, what has become clear is, over the long-term, the electronics industry must develop strategies to minimise the potential impact of unforeseen circumstances such as the coronavirus pandemic.
One solution could be identifying and working with a supplier with an extensive global manufacturing footprint and partnerships. An established supplier, with an array of carefully selected product partners, can propel electrical manufacturers firmly to the forefront of the industry, unleashing a wealth of components and enabling the delivery of a high quality and cutting edge solutions for customers.