Several years of supply chain disruption and component shortages continue to impact the way engineers design, according to the Avnet Insights second annual survey on market trends in the electronics and components industry. A key finding indicates that design engineers are using three key strategies to ensure component supply, but in many cases, it comes at a big cost. They are also working more closely with partners to get to market faster.
According to the survey of 1,605 engineers in the Americas, EMEA, Asia, and Japan, 79% of respondents said component availability is their biggest concern, compared to 18% who are concerned about market conditions. The biggest impact continues to be microprocessors as well as logic and programmable devices, similar to last year’s survey. Nearly 75% of respondents said access to these devices has worsened more than the other component categories. Another challenge is the availability of analog devices, according to 69% of respondents.
However, component availability is stabilizing or improving for other categories including passives (54%), interconnect (51%), and wireless and RF (47%). Avnet’s materials team reported in August 2022 that 65% of lead times were the same or slightly improved, with an average of a 10-day improvement.
(Source: Avnet Insights)
The good news is that 41% report that component shortages have stabilized or improved compared to last year. However, 59% said the components shortage has become more severe since 2021 and 74% reported that access to electronics components has been a significant challenge.
Despite reports of stabilizing and improving component availability, 86% of survey respondents rate semiconductor market conditions as terrible or poor. The reasons are plenty as designers still struggle to get parts, along with “rising inflation, currency exchange rates, transportation and packaging issues, raw material shortages, extreme weather conditions, and container shortages,” according to the report.
However, there is some optimism in the market. More than one third of respondents in Asia rate the market as fair, good, or excellent (36%). APEC respondents also report more improvements in lead times and prices compared to respondents in EMEA and the Americas.
So how are design engineers dealing with the shortages? According to survey respondents, they are using pin-to-pin replacements (25%), redesigning boards (25%), and using drop-in replacements (25%).
(Source: Avnet Insights)
The survey also reveals these strategies can come at a big price, where engineering teams are diverted from new product development as they redesign existing products around available components for critical parts. In addition, redesigning a board requires extra time as well as a new round of tests, approvals, and recertifications, revealing they often have to go through this process multiple times with a single board.
Even if they are able to work on new designs, the survey finds that they run into challenges just getting small quantities of parts to build boards for prototyping. To deal with these issues, survey respondents are drawing down buffer stock. At the same time, they are building up buffer inventory (23%), lengthening their supply agreements (21%), and improving relationships with their distributors (19%).
In addition, 23% reported that their company is moving away from a lean inventory management strategy, but it remains to be seen if this is an industry trend. According to the report, the “chip shortage just may be challenging the basic premise of lean inventory management.”
The report cites one engineer: “We are going to continue to order and hold inventory until we are confident that stock is being maintained for the parts we need. Even with new fabs being built, parts are just not going to magically appear overnight, so we’ll probably keep doing it for a couple of years at least.”
During the design process, 25% of respondents said they are designing in standard approved components from multiple manufacturers while 23% are testing and qualifying multiple parts early in the design process and 14% are developing a more flexible product architecture. They are also looking for alternative sources for parts (35%) and searching outside of their company’s currently approved manufacturing list (23%).
Looking ahead
Survey respondents are preparing to deal with continued price increases and longer lead times. Twenty-nine percent said they are planning for more price increases and longer lead times (26%). They also expect counterfeit components to increase (15%) and market conditions to worsen (15%).
As a result of market conditions, 14% said they plan to delay new product introductions, 7% plan to reduce production, and 6% plan to cancel component orders, despite the risk of exiting the queue for parts, according to the report.
Organizations also can expect some organizational changes that deliver improved collaboration between design and procurement teams as component availability becomes a priority. Twenty-five percent of respondents said they plan to build strong collaboration between procurement and engineering, 13% will establish cross-functional teams that include procurement, and 13% will establish cross-functional teams for decision making.
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