Supply Chain Disruption Easing in 2023
By Rob Moore, Sales Director of Electronic Manufacturing Solutions.
Most businesses don’t look back on last year fondly, given that 45% of companies faced supply chain impacts that caused higher costs, interruptions and failures — hindering their abilities to service customers.
These complications were triggered mainly by the aftermath of the pandemic and the ongoing conflict between Russia and Ukraine. But now that businesses have had time to adapt, supply chain disruption is looking much less severe, with some positive changes being witnessed across the board.
So, what improvements will we see throughout the remainder of 2023, and how will they impact electronics manufacturers?
Greater availability of key components
When thinking of supply chain disruption in the electronics industry, component shortages are among the first things that come to mind. And rightfully so, considering semiconductor supplies were around 22 million wafers short of what was required to meet demand per year in 2022.
Whilst supplies aren’t where they need to be just yet, they’re headed in the right direction (current semiconductor shortages are just 1.5 times normal, compared to more than nine times normal in the pandemic). As such, customers can expect to see more streamlined productions and fewer order complications in the coming months.
Reduced price pressures
Inflated prices have been another defining characteristic of the electronics industry amidst supply chain disruption, namely due to the scarcity of essential supplies and lingering effects of inflation that prompted many manufacturers to raise their prices.
However, increased supplies have helped alleviate price pressures, with input prices paid by electronics manufacturers rising at their lowest rate since October 2020 and selling price inflation at a 26-month low. Those purchasing consumer goods and communications equipment will enjoy the greatest cost savings, with computing equipment and industrial electronics taking longer to catch up.
Fewer backlogs
Supply chain disruption contributed to a build-up of bottlenecks in electronics manufacturing from 2020 to 2022, leaving many customers waiting for their projects to be completed — or without the products they had ordered.
Now that demand for electronics has stabilised, new orders are falling at a steeper rate than production, and backlogs have started to dissipate. The industry’s current average output index is 50, whilst the average order index is around 47.5 — giving electronics manufacturers a chance to catch up on delayed orders and fulfil customer requests from the start of the year.
Shorter average lead times
All the complications that arose from supply chain disruption last year inevitably took their toll on order timelines in the electronics industry, with year-long lead times not uncommon for particularly in-demand components.
Thankfully, the first half of this year has seen operations speed up, and nearly 60% of lead time dimensions will decrease in the third quarter of 2023. These figures are drastically different to the Q3 predictions for 2022 — that 73% of lead times would increase — promising quicker turnarounds for customers.
