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December 10, 2021

2022 & 2023 – The Reality of Component Supply and Demand

NewPower Worldwide’s CEO, Carleton Dufoe, warns purchasing professionals that increased pricing paired with long lead times will be commonplace.

Throughout the Covid-19 pandemic many businesses have undergone a digital transformation to thrive—or in some cases, just survive. This has significantly increased demand on the semiconductor ecosystem, fueling forecasts for continued growth in 2022. Factor in geopolitical relations and 2022 promises to be a year of continued uncertainty. It’s likely the world will not see pre-pandemic supply chain operations until 2023 or 2024.

Component manufacturers have a clear understanding of their 2022 production limits. Many are already planning staggered price increases of 25 to 35 percent into 2022. Some are offering customers 60 to 70 percent delivery commitments if the scheduled price increases are agreed to and NCNR POs are placed well in advance. Purchasing professionals must adapt to this new climate, as increased pricing paired with long lead times will be commonplace.

With global supply chains in flux and demand for semiconductors accelerating, manufacturers will have to choose which customers and industries to prioritize. 2022 and 2023 will bring the perfect supply/demand storm as basic economics take over. For ODMs that can make more money reselling components they receive vs building and shipping, profits and margins may skyrocket without the liabilities of production. OEMs with significant market share and profitability are buying and stocking components, refusing to let a ten-cent part hold up revenue any longer. As shortages become more prevalent, the market is shifting like never before: OEMs that aren’t prepared to react will be left behind.

For more information about NewPower Worldwide or to find out more about its services, contact:

NewPower Worldwide, LLC
107 Northeastern Boulevard, Nashua
603-718-8189 | www.newpowerww.com