Component Shortages – Don’t Panic, We’ve Got Your Back

By Carl Hung, CEO Season Group

Ok, so maybe not panicking is easier said than done, but when things get tough, and trust me they are tough right now, you realize who your partners are and who’s got your back!

At Season Group we’ve seen component shortages come and go for numerous reasons over the years from natural disasters to trade wars and tariffs and most recently as a result of the global COVID-19 pandemic. They are all challenging in their own way and they all require different or custom solutions. What is essential is that we view every customer as a partner and we work specifically with them on a case-by-case basis to ensure that these disruptions can be managed and the ensuing risks can be mitigated.

Right now the biggest issue is with shortages in the semiconductor supply chain. And rest assured this is a severe shortage. We are reading reports of automotive manufacturing lines having to stop production or move to short weeks, and even with newly elected President Biden signing executive orders to protect the security of certain supply chains that they consider critical.

Partnerships That Plan

In 2020 we all saw the biggest supply chain disruption of our lives when COVID-19 grew from a small outbreak to become a global pandemic on a huge scale. This is when the rubber really hit the road with the partnerships we have throughout the supply chain. Real partnership with customers and deep long-term partnerships with our suppliers helped us through the stormiest waters we’ve been in for decades.

We learned a lot in 2020 and we’re taking that knowledge forward into 2021 and using it to help us deal with the current semiconductor supply disruptions. So, here are a few things we think are important right now and that any brand should expect from their EMS partner:

• Constant communications and openness are absolutely essential in any relationship. In the world of manufacturing that means sharing what we both know and what we both expect, and admitting what we don’t know. Aligning customers forecasts with capacity and component availability is always important, but right now when forecasts and availability are changing daily we need to have lines of communication that work in real-time. We also need to be open and honest when the news is bad or when tough decisions need to be made. The sooner we get ahead of these issues the sooner we’ll create a solution together. This is a deeply collaborative process!
• Thinking outside the box can provide new and valid solutions. We’ve always supported our customers with design services, and as a ‘full-stack’ EMS we have a lot of services beyond manufacturing that can really add value. For some customers that might mean sourcing an alternative part and making some minor design change to accommodate it. For others it might mean a radical redesign that moves a product away from single sourced parts and requires a new PCB (printed circuit board) to be designed and sourced. For example, we have helped some customers change their main microcontroller and some with alternative wireless connectivity components such as Bluetooth or WiFi. Some of these semiconductor shortages, which aren’t going away anytime soon, are adding twenty weeks or more to lead times. That’s enough time to draw up a new PCB design and get it into production. All while making sure we can source enough parts to see us through the transition to the new version.
• The world is your oyster, so think about where your product is being made. Is the supply issue regionalized and do you have a global partner that might be able to switch production locations or procure parts in a different geography? During the pandemic this was essential. Regions were hit by the pandemic at different times and this perfect storm of disruption is still roaring around the world. In 2020 we moved projects quickly from factory to factory to ensure supply chain continuity for our customers and we’re doing it again now to mitigate the problems caused by shortages.
• Better resilience planning needs to be a cornerstone of future product design. If we’ve learned anything from trade wars, tariffs, the pandemic and now this component shortage it is that the world of electronic manufacturing is fickle and fragile. Demand ebbs and flow, supply chains get disrupted, and life is unpredictable. We need to design with this in mind and we need to plan for the worse and hope for the best. Designs need to reflect some flexibility in the devices and parts that are being used. Every part of the BOM (bill of materials) should have multiple sources and a back up plan if they are not available. And that doesn’t mean buying the same part from two distributors or even two similar parts. Often a supply chain disruption can happen downstream in the materials used to make a part, such as rare earth minerals and other critical raw materials.

No Quick Fix

It takes well north of a billion dollars to build a semiconductor plant and well over a year to stand one up. Radical shifts in demand cannot be quickly met by added capacity. The pandemic led people to buy more laptops and tech for their home offices, to buy more home gym equipment, to buy more entertainment equipment and even more tech for home-schooling. The world was predicting a global recession and meanwhile the tech industry was selling out of everything.

The lessons are simple. Expect more disruption, because there will be more. Build great partnerships, because we all need friends when the going gets tough. And communicate and collaborate as often and openly as you can to make sure all the stakeholders are aligned on goals, expectations and deliverables.

Disruptions might be unpredictable, but they don’t need to be catastrophic!