Navigating Electronic Component Sourcing Challenges in 2024

19 February 2024

Electronic component sourcing strategies for supply chain security in a shifting landscape.

Understanding the rollercoaster of supply between 2019 - 2022

In recent years, sourcing electronic components has become an increasingly complex task due to various factors. The global pandemic disrupted supply chains, leading to semiconductor manufacturing halting as lockdowns were enforced worldwide. Businesses had to adapt to lockdowns, and the work-from-home model surged, triggering a spike in personal electronics orders. This unexpected surge, combined with the initial reduction in orders by original equipment manufacturers (OEMs), gave rise to the global chip shortage.

The subsequent years brought further disruptions, including bad weather, chip Fab fires, seaport congestion, a Suez Canal blockage and new Covid-19 variants causing additional lockdowns. This prolonged the recovery of the global supply chain, affecting various industries.

Automotive OEMs faced significant challenges as they dealt with smaller chip orders and the demand for larger legacy nodes, which were becoming obsolete. The chip shortage resulted in a $210 billion loss in sales for carmakers in 2021, and McKinsey & Company predicted that the shortage for automakers might persist until 2023, or even extend to 2030 if chip allocation challenges persist.

So, in 2024, how's the electronics component market looking?

The Global Electronic Components Market 2023-2031 is increasing demand in the Electronics & Semiconductor industry according to multiple research papers. So despite the slump in demand during Q4 of 2023, as the industry worked through the inventory overage - 2024 looks like being a good recovery year, especially for the semiconductor industry. This is because of the rapid evolution of cellular networks and electric vehicles (EVs) and emerging technologies like artificial intelligence (AI) and smart agriculture – all of which are going to take a lot of computing power.

An increase in the IoT and IIoT markets has resulted in a strong demand for next-generation communication modules. Augmented Reality (AR) technology is transforming industrial design, product development, and customer experiences. Some experts project the wearable market’s CAGR could be as high as 14.6% despite the challenging economy. Whatever happens, the latest standards, whether it is BLE, Wi-Fi 6E, Matter, or 5G are an attractive proposition for many designers, as they appear to resolve a multitude of issues, plus offer improved performance.

The greatest challenge of 2024 will be keeping pace with the rate of change

The biggest headaches for supply chain management will be experienced across the industrial, medical, aerospace and defence sectors. These industries manufacture ‘long life’ products, and component manufacture is focused on supporting the most advanced technologies with new Fabs, backed by the trend toward consolidation in the semiconductor industry. This will lead to more product discontinuance notices (PDNs) or end-of-life (EOL) notifications.

The sustained escalation in intelligence across a variety of electronic applications is driving a requirement for enhanced perception. New standards like IoT Secure are being introduced as businesses become more aware of the high-profile damage that can be caused by security breaches as they seek to rectify possible vulnerabilities. The electronics industry is an ever evolving and innovative space that requires both buyers and suppliers to stay ahead of the curve.

What can contract manufacturers (CMs) and electronic manufacturing service (EMS) providers do to navigate the Electronic Component Sourcing Challenges in 2024?

Despite the ongoing challenges, there are strategies for OEMs, contract manufacturers (CMs), and electronic manufacturing service (EMS) providers to navigate the shifting landscape effectively.

1. Supply Chain Resilience through Diversification:

To overcome procurement challenges, companies must expand their supply ecosystems. Traditional measures have proven insufficient, and OEMs like Tesla and Nissan found success by changing their sourcing methods during the chip shortage. Tesla pivoted by acquiring substitute alternate chips and updating firmware, generating over $1 billion in revenue. Nissan revamped circuit board designs, accommodating off-the-shelf components, saving costs, and ensuring production continuity.

Collaboration is also emerging as a solution, with automotive OEMs partnering with OCMs for future capacity and technological investment. Countries and OCMs are working together to pass semiconductor-friendly incentive plans, preventing a shortage of similar magnitude.

Diversification is essential for resiliency, as demonstrated during the pandemic when extreme lockdowns in China impacted the supply chain. As the supply chain diversifies, hard-to-find components are less susceptible to the risks of a concentrated supply base.

2. Mitigating Risks: Avoiding Unverified Suppliers:

Due diligence is crucial when working with new vendors, especially during the chip shortage when counterfeiters saw an opportunity. Criminals utilised fake listings and posed as reputable vendors, defrauding buyers of hundreds of thousands of dollars. Manufacturers should only work with trustworthy suppliers operating through legitimate marketplaces to avoid existential risks associated with counterfeit components.

3. Efficient Procurement through Trustworthy Accredited Partners

Traditional methods of sourcing electronic components can be inefficient. Whistler Technology operates as a global partner for microelectronics, offering over a billion component listings from thousands of validated, traceable suppliers and franchised partners. It provides detailed product information, datasheets, lifecycle status and upfront pricing, prioritising seamless purchasing functionality through the Whistler Assured Programme.

Whistler Technology operates worldwide with a logistics network facilitating the movement of electronic components globally. Our portal integration allows buyers to centralise and automate purchases, bringing them critical market data via the Whistler Wizard. With Whistler Technology, manufacturers can navigate the ongoing challenges in the electronic component landscape efficiently.

The electronic component sourcing landscape remains challenging

However, with strategic approaches such as supply chain diversification, careful vendor selection, and efficient procurement through trusted online marketplaces like Whistler Technology, manufacturers can overcome obstacles and ensure business continuity in this dynamic environment.

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