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June 16, 2022

When Will the Shortage Market End?

NewPower Worldwide explores the underlying problems causing the semiconductor shortage and estimates the market will remain constrained well into 2023

Electronic Sourcing, June 2022

Did you know that semiconductors are the world’s fourth most-traded product? Trailing only crude oil, motor vehicle parts and refined oil. As semiconductor demand soars and the most significant shortage of our lifetime unfolds, the biggest question in boardrooms worldwide is when will this end? Unfortunately, with the unpredictability of material availability, freight costs, labor scarcity, container shortages, etc., many believe we’re in for a long, painful recovery, with the current conditions being the new normal well into 2023.

To better understand where the semiconductor shortage came from and why it’s here to stay, we have to turn back the clock… In 2020 the semiconductor industry was recovering from a recession and was trending towards a recovery. When Covid-19 arrived, the automotive sector forecasted a downturn in demand. As feared, sales dropped significantly in 2020, and automotive leaders canceled larger orders with semiconductor manufacturers. Surprisingly, automobile demand began to increase, but manufacturing capacity was no longer available because production had been allocated to the consumer electronics industry, which saw a surge during the pandemic. Demand for smartphones, tablets, laptops and game consoles depleted all relevant chip inventory – and the semiconductor shortage was upon us.

If you dig into the details, you’ll learn the semiconductor sector has a variety of variables that further complicate the problem. Manufacturing a semiconductor is incredibly capital intensive; it requires unstable raw materials management and the supervision of high-value sensitive items. All of this involves implementing highly specialized and tightly aligned logistics services to support each component of the semiconductor value chain. Compounding the problem is that the semiconductor logistics ecosystem must cover almost every continent and country, many times in remote regions of the globe. Unfortunately, the world’s largest companies are learning the hard way they must adapt their existing supply chain process or be prepared to weather the financial repercussions of not doing so.

Lead times for many semiconductors are currently eclipsing one year. Automobile manufacturers worldwide have reduced output due to a lack of semiconductors, as reported widely in the news. Most have missed their 2021 goals and have hinted toward similar 2022 results. Unfortunately, the automobile industry is not alone. The chip shortage affects the electronics, medical, technology, and networking equipment industries. Anyone with a product reliant on the semiconductor sector should prepare to deal with a constrained market well into 2023.

NewPower Worldwide is an industry expert in the sourcing, procurement and redistribution of electronic components, computer products and peripherals. NewPower provides real-time supply chain solutions in local markets with nine offices strategically positioned worldwide. Their proprietary cloud-based sourcing technology, EMPOWER™, offers instant access to billions of parts, and their $325M committed credit facility provides peace of mind in this volatile market. NewPower allows organizations to plan and forecast years in advance – contact NewPower today and discover the NewPower Difference.

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