It is often the commodity passive components where the procurement problems are at their greatest.
Admittedly, it is ICs that will get the majority of attention when it comes to electronic system design, with the supporting passive components too often receiving very little of the limelight. Nevertheless, their value should certainly not be underestimated.
The passives incorporated into electronic hardware have important roles to play when it comes to ensuring that the performance levels expected are actually delivered, and providing all the necessary functionality. If a specific component – no matter how small or inexpensive it may be – cannot be sourced in an acceptable timeframe, then it could have a major impact on the OEM’s production process. Existing order obligations may consequently not be fulfilled and prospective windows of opportunity might end up being missed.
Over the last 18 months, the global electronics supply chain has been through what is widely considered to be the most challenging period in its entire history. The component shortages that were already starting to be witnessed got further exacerbated by interruptions in production workflows caused by the COVID-19 pandemic.
An area that was subject to long lead times even before the arrival of Covid-19 was multi-layer ceramic capacitors (MLCCs). After a prolonged lull in demand back in late 2018 and early 2019, many manufacturers dramatically curtailed their production capacity. Since then, however, market dynamics have brought these components back into favor – with unprecedented volume requirements now being witnessed.
A report from Mordor Intelligence expects that the worldwide MLCC market, which was worth $10.3 billion in 2020, will have surpassed $15 billion by 2026. That constitutes a 5.42% compound annual growth rate (CAGR) over that period. Among the sectors that are driving demand are 5G smartphones, electric vehicle (EV) powertrains, and renewable energy generation systems.
E-mobility and its implications
5G mobile communications
Redefining the passive supply chain
Facing a lack of available inventory, OEMs are currently being placed under incredible pressure. Ways need to be found to mitigate supply shortages and reduce the lead times involved. To do this OEMs must start working more closely with their distribution partners.
Moving forward, the “just in time” manufacturing culture that has built up over the last decade will no longer be applicable. Instead, the engineering and purchasing departments of OEMs will need to be much better prepared. This will mean that they can avoid the risk of having to make unwanted changes to product designs, due to required quantities of a constituent component being too difficult to obtain – and not be hit by the heavy expense associated with such undertakings.
If they have greater visibility of what their passive requirements are likely to be in the medium and longer-term, then they can successfully plan ahead. Also by entering into consultation with their preferred distributor, they will be made aware of industry trends that are emerging, as well as any geographic demand hotspots that could detrimentally affect supplies of particular components.
Conversely, distributors need to be able to use their understanding of the market and key applications to identify where demands are likely to be at their most acute. By doing so, they can then ensure that they stock appropriate quantities of component parts for them to keep up with their customers’ requirements. Also, if a certain component is going to be difficult to source, they must use their expertise to advise what the potential alternatives might be.
The electronics industry has always been in a state of perpetual flux, with it never standing still but always progressing and adapting. Exciting new applications are continuously appearing on the horizon and component parts need to be selected that will support them.
Though much of the engineering focus is on the high-end active devices, it is often the commodity passive components where the procurement problems are at their greatest. The MLCC shortages that OEMs have been forced to deal with in recent times underline this point. They show the importance of establishing effective supply channels to combat the build-up of bottlenecks.
This article was originally published on EPS News.