The tech industry is preparing for a potential shortage of passive electronic components.

In short: The technology supply chain is still dealing with a perfect storm of factors that have resulted in clogged ports and severe bottlenecks in the flow of raw materials and components needed to create products with electronics inside. Slowdowns in production in China and elsewhere in Asia due to energy and Covid-related restrictions are already affecting suppliers of passive electronic components and microcircuits, but some are hoping for their ability in the coming months without any major disruption.

It is no secret by now that the technology supply chain is experiencing cascading shortages of materials, components and shipping containers, as well as rising energy prices, plant closures related to Covid, rapid changes in environmental policy, unrelenting demand for electronics and semiconductors. , the rapid digitalization of companies and government agencies around the world, and many other factors.

V lack of chips there has been much more coverage in the news over the past year, but other critical components have also been in short supply. Passive electronic components such as resistors, capacitors and inductors were already a little hard to find at the end of 2020, and the situation could get worse by the end of this year.

Back in December Walsin Technology reopened its manufacturing plant in Malaysia after several disruptions related to blockages in the region. However, just a month later, a fire broke out at a Taiwan Multilayer Ceramic Capacitor (MLCC) factory in Dongguan, China, causing a fire. concern around the supply of MLCC and chip resistors.

By April, these concerns were largely dispelled. Major passive component suppliers such as Yageo, Walsin Technology, Chilisin Electronics, ABC Taiwan Electronics, and Tai-Tech Advanced Electronics have been optimistic their ability to supply passive components to their customers in the second and third quarters at a capacity utilization rate of 80 to 90 percent.

Fast forward to August, and renewed restrictions in Asia have once again jeopardized the production of passive components. Last month, the impact of summer restrictions came to the fore as Japanese suppliers of aluminum capacitors were forced to operate at significantly lower capacities and lead times increased to more than six months.

By the end of September, China had implemented an energy crisis that forced several suppliers from tech giants such as Apple, Tesla and Qualcomm to cut or even stop production. As we enter the fourth quarter, Taiwanese companies concerned these disruptions, and the most optimistic of them expect at best to maintain current production levels for the rest of the year.

For example, Yageo believes it can meet demand for MLCCs from automakers and other industrial customers, as its factories are located outside areas of China that have experienced power outages. At the same time, Walsin is moving forward with the construction of a new plant in Kaohsiung, Taiwan, which will help supply MLCCs and chip resistors in the coming months. This is good news, in particular for automakers who have been hit hard by the industry so far.

Image Credit: Andrey Metelev

However, aggressive power outages in China can still create problems, as we have seen with the significant decline in high-purity silicon production in the region. This has pushed prices up sharply over the past year or even month, and the same has happened with rare earths and other raw materials such as copper, tin, aluminum and cobalt that are used to package, assemble, and connect microcircuits. electronic components on printed circuit boards, etc.

Some suppliers will be able to reduce their margins, but most will be forced to stockpile components and raise prices, which in turn could push retail prices higher for all electronics as early as next year. Combined with an acute shortage of skilled workers, this could have ripple consequences for several industries. The cherry on top is a shipping crisis that will turn this year’s holiday shopping season into a nightmare for people who don’t plan ahead or want to consider locally sourced goods.

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