Quarter 2 Market Conditions Update

We have all read and heard about the supply chain issues over the past few months. Now, the reality is setting in with shortages and allocations. These shortages did not start with the pandemic but have been coming for some time. And these shortages are not going to end any time soon. It will take billions of dollars of investment in infrastructure to expand production. The root cause changes with every article you read, the podcast you listen to, or the daily newscast. The concepts of legacy supply chain principles are no longer relevant. Lean inventory, Just-in-time Inventory Management, and Kanbans are becoming obsolete in many industries.

No matter the blame, we look forward to the future and produce solutions. Here at Burton Industries, we lose sleep over our customer’s success and future growth. We are pivoting quickly from legacy supply chain principles to resilient supply chain practices. Let us guide you through this strained time. We will keep you moving forward and put plans in place for future projects.

Attached is a summary of component lead times and pricing trends referenced from the “Futures Market Conditions Report” for Quarter 2- 2021.

-Discretes: Pricing and lead times increasing across the board.

-Surface Mount General Capacitors (ceramic):  Overall, pricing steady with lead times of 18-48 weeks

-Passives: Mix of increasing pricing and lead times with many moving into the red category.

               -Trimmers & Pots: increased pricing and lead times 10-12 weeks

-Electrolytic: Increasing lead times with a mix of increased pricing. Lead times 14-32 weeks

-Capacitors (film): Mix of stable pricing with stable lead times of 10-36 weeks

-Capacitors (tantalum): Mix of stable pricing with increased lead times  4-46 weeks

-Capacitors (polymer tantalum): Mix of stable pricing with mix of lead times 20-30 weeks

-Filters: Mix of stable pricing and increased lead times 20- 40 weeks

-Inductors: Mix of stable pricing and increased lead times 12-30 weeks

-Fixed Resistors: Increased pricing and increased lead times 30-52+ weeks

-Resistor Networks: Increased pricing and increased lead times 15-40 weeks

-Batteries:  Stable pricing and stable lead times 8-38 weeks

-Electromechanical:

-Switches: Mix of stable pricing with increased lead times 10-18 weeks

-Fans: Stable pricing with mix of increased lead times 12-24 weeks

-Connectivity:

               -Wi-Fi modules: Increase pricing and increased lead times 24-30 weeks

               -Bluetooth modules: Mix of stable pricing with increased lead times 16-30 weeks

High End:

               -Microchip: Lead time and pricing increases for MCU (8 bit & 32 bit), PHY/Ethernet, USB, and 32 bit MPU 30-55 weeks

               -NXP: Pricing increase for 8 bit MCU, Automotive, 32 bit MPU, and Network Processors. Increase in lead times for all above including 32 bit MCU. Automotive allocation and 26-52 weeks on the rest

               -Renesas: Stable lead times and pricing Automotive, increase of lead times and pricing on 8 bit MCU, increasing lead times with steady pricing for 32 bit MCU, and steady lead times and increased pricing for 32 bit MPU. Average lead times 30 weeks

               -ST: Increased pricing and lead times for 32 bit MCU and allocation for 8 bit MCU, 32 bit MCU, and Automotive.

Our supply chain team is reviewing contraints reports daily to ensure fast action as conditions change. When new contraints are identified, purchasing, program management and engineering review options for alternate suppliers and/or substitutes. Watch our blog for further updates on trends and the tools we are using to address availability issues and pricing increases.

January 2021 Material Trends Update

There are multiple drivers of materials constraints in 2021. First, pent-up consumer demand is driving spikes in products across multiple sectors that were in short supply in 2020 due to the pandemic. The automotive sector is seeing both pent-up demand across all models plus increased demand for electric vehicles. Communications and IoT are also driving demand and 5G will only escalate that as more infrastructure is being installed. WiFi and Bluetooth modules are increasing lead-times and we expect pricing to follow. And COVID-19 continues to drive increases in medical equipment demand. As a result, we feel constraints will continue throughout the year and are starting to see both allocation and price increases.

We are seeing price increases from multiple suppliers. Basic materials costs for PCBs and components have increased, freight costs are up and COVID-19 mitigation is also a cost driver. We are also keeping a close eye on component quality, as we’ve seen failure rates go up when suppliers reach capacity.

The color-coded chart highlights trends by commodity. Here are the specific trends we are seeing based on the information we are receiving from distribution.

  • Discretes: Pricing and lead-times increasing across the board; however, there are still a few manufacturers w/stable lead-times and prices
  • SM Gen Capacitors (ceramic): Mix of increasing pricing and lead-times, still some stable lead-times and pricing
  • Passives: Stable price and lead-times of 14-16 wks, however, passives are moving more into a yellow/orange category and we expect to see a move into red by mid-year
    • Trimmers & pots – stable price and lead-time 10-14 wks
  • Electrolytic: mix of increasing lead-times and prices increasing; some still stable
  • Capacitors (film): Mix of stable pricing and lead-times, some increasing lead-times and pricing
  • Tantalum:  mix of stable pricing, lead-times running 14-52 wks and increasing lead-times and pricing
  • Polymer tantalum: Mix of stable and increasing pricing and lead-times
  • Filters: mix of stable and increasing lead-times and pricing
  • Inductors: majority stable pricing and lead-times, few increasing lead-times and pricing
  • Fixed Resistors: mix of stable and increasing lead-times and prices
  • Resistor Networks: mix of stable and increasing lead-times and prices
  • Surface Mount General Capacitors (ceramic): stable pricing, lead-times 20-24 wks
  • Batteries: stable pricing on majority, stable lead-times 8-38wks
  • Sensors/Switches:
    • Diodes Inc.: lead-time is increasing 12-14 wks, pricing stable
    • Ams: lead-times 8-30 wks, stable sensor prices and lead-time
    • NXP: increasing lead-times and prices 32 week LT for sensors
    • On Semi: increasing lead-times, pricing stable
    • Renesas: lead-times up to 20 weeks, stable pricing
    • ST Micro: lead-times stable around 20 weeks, pricing increasing
    • Infineon: 25-plus week lead-times on switches, pricing stable
    • Melexis Sensors: lead-time stable at 16-46 weeks, price stable
    • TE: lead-time stable at 30 wks, pricing is stale
  • Fans: mostly stable, few increasing lead-time and prices
  • Connectivity:
    • AMS: RFID chips lead-time up to 30 wks, pricing stable
    • Laird: WiFi modules stable; antennas, pricing and lead-time increasing
  • High end:
    • Cypress: lead-time and prices increasing for Bluetooth modules, lead-times increasing across high end
    • Microchip: lead-time and prices increasing
    • NXP: pricing is increasing, lead-time stable for all except chip solutions; high end parts, automotive on allocation
    • ST Micro: increasing for 8 and 32 bit mcu lead-times
    • Murata: prices stable, lead-time increasing 30 weeks

Here are the manufacturers we are monitoring closely for increases in lead-times and pricing:

  • ST Micro – price increases across all lines, allocation has begun
  • Panasonic – shipping delays causing increased lead times
  • NXP – increased prices
  • Silicone Labs – increased prices
  • Microchip – no cancellations within a 90-day window.

Tips for Mitigating Supply Chain Constraints

The challenge with 2021 will be the variety of drivers of materials constraints. Unlike previous years, constraints aren’t being driven by demand changes in a single industry or region. Different drivers will be impacting different commodities throughout the year. The team at Burton Industries has the supply chain management expertise, systems and engineering support necessary to help navigate these challenges. That said, mitigating supply chain constraints requires a coordinated effort from both Burton’s team and its customers’ teams.

At a minimum, we ask all our volume production customers to give 26+ weeks of commitments based on component lead-times.  A rolling 12-month forecast is preferred. We modify that expectation for customers with legacy products that are built on an as needed or a few times a year basis.

Here are a few tips to further mitigate material availability/supply chain disruption issues:

  • Put Burton Industries’ design team in the design cycle from a Bill of Materials (BOM) standpoint as early as possible. We offer a free BOM scrub service to existing customers to help them assess risk in critical to design components.
  • Avoid single source parts or those with limited sources—our team can help you identify alternates.
  • If a part has been labelled not recommended for new product use, it should also be avoided as its obsolescence risk is high.

Our supply chain team is reviewing a weekly constraint report to ensure fast action as conditions change. When new constraints are identified, purchasing, program management and engineering review options for alternate suppliers and/or equivalent substitutions and inform customers of the available options for addressing the issue. Watch our blog for further updates on trends and the tools we are using to address availability issues and/or pricing increases.

Stocking Arrangements to Mitigate Supply Chain Disruption

Common Stocking Arrangements to Minimize Supply Chain Disruption_Page_1Material constraints continue to add challenges to electronics manufacturing. That said, the team at Burton Industries has implemented stocking arrangements with many of our customers designed to ensure that product will be available even when spikes in end market demand or further changes in material availability impact forecast assumptions. Our latest whitepaper, Common Stocking Arrangements to Mitigate Supply Chain Disruption, looks at the types of stocking programs available and their benefits and potential challenges. Read the full paper here.

August 2018 Supply Chain Trends

We continue to see lead-times stretching out across a number of components. InAugust Trending Info general ceramic capacitors, we see allocation at many suppliers, increasing lead-times and price increases. In fixed resistors, RoHM is not accepting orders, PSC is heavily constrained and has 52+ week lead-times. At other manufacturers we are seeing lead-times range from 8-30 weeks. Tantalum capacitor lead-times have increased from 15 to 28 weeks. In MLCCs, Murata and TDK are on allocation. Lead-times in general are running 12-30 weeks. Automotive components are the most heavily affected. STMicro is increasing lead-times across the board on all their products. We’ve included a color-coded chart highlighting trends in all commodities as of end of August 2018.

Burton Industries’ customers can contact their CSR and request a current spreadsheet outlining these trends by component type and manufacturer.

Supporting Variable Demand: Four Key Areas to Analyze

525123-Global SMT Jun_Burton Industries Variable Demand_Page_1As systems have created better real-time visibility in terms of end market demand trends, and raw material availability and production status in the supply chain, original equipment manufacturers (OEMs) have reduced finished goods inventory levels. The upside of reduced inventory is faster inventory turns and reduction of the non value-added costs associated with excess inventory. However, the downside is that a supply chain interruption or unanticipated spike in demand could result in empty shelves. One strategy to avoid that is simply to require the electronics manufacturing services (EMS) provider to carry a finished goods Kanban. However, pushing the costs of excess inventory safety stock down to the supplier doesn’t truly eliminate the cost. A better strategy involves working with the EMS provider to create a system that provides the needed flexibility, but minimizes the non value-added costs associated with material or finished goods in an extended “wait state.”

At Burton Industries, we have a number of customers with highly variable demand. The four areas our team focuses on optimizing to support variability efficiently are:

  • Design for procurement (DFP)
  • Forecasting
  • Stocking programs
  • Production throughput.

Read our latest article in Global SMT & Packaging which goes into more detail on this topic: Supporting Variable Demand: Four Key Areas to Analyze here.