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Supply Chain Jabil Introduces Procurement Intelligence Commodity (PIC) Report By Graham Scott, Senior Director of Global Commodity Management, Jabil
pliers. This deep involvement pro- vides insight into key commodity trends and potential strategies. The company has consolidated its re- search and market knowledge into an easy-to-understand snapshot for the entire supply chain community. This new quarterly report focuses on passive, semiconductor, high-end semiconductor, interconnect, and PCB commodities, as well as packag- ing materials, metals and polymers.
A
Navigating Electronics Procurement
Procurement organizations man -
aging electronic components are facing onslaughts from two powerful storm fronts — a major surge in demand on one side and a critical shortage of parts and materials on the other. These two factors are aligning perfect-
t any given time, Jabil man- ages over 700,000 parts, across more than 27,000 global sup-
ly to batter buyers with successive waves of shortages, price hikes and lengthening lead times. With this challenging climate forecasted to linger at least through the first half of 2018, buyers need to take immediate measures to ensure supply continuity. The mobile and automotive
markets are driving demand for key commodities, particularly passives, diodes, transistors, and memory chips. Each new high-end smart- phone released during the last three years has doubled its memory con- tent, on average. Meanwhile, the electronic content of cars is increas- ing sharply, with electric vehicles re- quiring three to four times as many multilayer ceramic capacitors than conventional gas-powered cars. This increase in usage is strain-
ing the capability of suppliers to meet demand. Many suppliers of components have shifted their capac- ity to leading-edge technologies. This
has resulted in shortages of mature, less-profitable product families. Sup- pliers that continue to manufacture such legacy products will only pro- duce those parts at profitable levels, generating price increases across the wider customer base. Some manufacturers of stan-
dard commodity products have con- firmed with Jabil that they are im- plementing allocation processes. With these sources rationing supply on a customer-by-customer basis, many buyers may be unable to se- cure sufficient quantities of parts. Because no lessening of demand
is expected for the mobile and auto- motive markets in the near term, these market dynamics are unlikely to change soon. In light of this reality, Jabil strongly recommends that buy- ers provide visibility to demand, and where possible, place extended orders for components in order to lock in sup- ply. When a buyer enters such a long- term supply agreement, it should en- able the supplier to reserve capacity to manufacture the longer-term com- ponent demand. This kind of insight leads to better support and service from the supplier.
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Passive Commodities. Supplies of ceramic capacitors are dwindling as smartphone makers dominate the consumption of smaller-case-size, high-capacitance MLCCs, while au- tomotive makers secure most of the high-reliability components. Avail- ability of other types of MLCCs have also decreased, because suppliers have shifted their investments to the types required by smartphone and automotive makers. Ceramic capacitor lead times
are increasing, particularly for small case sizes and automotive-grade parts. This is expected to persist for the next 9 to 12 months. Lead times for film capacitors have stretched to 24 to 38 weeks, due to capacity con-
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straints. Film capacitor companies have no plans to expand manufactur- ing capacity in the short term.
Semiconductor Commodities. In the analog semiconductor segment, the average lead time for standard linear parts has expanded to between 8 and 10 weeks. The lead time for high-performance analog is now 10 to 14 weeks. Capacity utilization for manufacturers of these parts now ex- ceeds 90 percent. Lead times are ex- pected to increase through Q1 2018.
High-End Semiconductor. Overall supply is tight for high-end semicon- ductors, including chipsets, microcon- trollers, programmable logic, and ap- plication-specific ICs. Demand from the automotive market remains strong, due to the increasing electron- ic content in vehicles. Major mobile device brands are
expected to generate strong sales. In- dustrial markets are picking up. The book-to-bill ratio for high-end semi- conductors is higher than 1.00, indi- cating continued strong demand. Suppliers are continuing to build-to- order for high-end semiconductors. In order to retain allocation, buyers should avoid pushing out orders.
Interconnect Commodities. In the connector market, no allocation or major constraints in supply are ex- pected for the next six months, with the exception of products from a few specific suppliers. Most suppliers are experiencing strong demand from the automotive market.
PCB Commodities. Revenue ex- panded for the major PCB suppliers based in Japan, Taiwan and China during the first six months of 2017. The majority of the increased rev- enue for Japanese and Taiwanese manufacturers was generated by sales to smartphone manufacturers and the automotive industry. Load- ing for PCB shops in Chinese plants is running at between 75 and 85 per- cent. Chinese PCB suppliers are at 90 percent capacity, mainly driven by demand from the automotive mar- ket. The average lead time is 6 to 8 weeks for conventional PCBs and 10
weeks for complex boards. Contact: Jabil Circuit, Inc.,
10560 Dr. Martin Luther King Jr. Street N, St. Petersburg, FL 33716 % 727-577-9749 Web:
www.jabil.com r
The full report is available on-
line at
https://www.jabil.com/solu- tions/featured-solutions/supply- chain-orchestration/idsc-managed- services/procurement-services/gat- ed_content/procurement_intelli-
gence_commodity_report.html
February, 2018
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