Front End | Electronic Components Supply Network Political investment
The investment levels implicit in the ‘Chips Acts’ recently passed in the EU and USA will take several years to really impact manufacturing capacity but given the longer-term demand forecasts it’s certain that this capacity will eventually be required. Sadly, the planned fabs are already two generations behind what is today considered ‘state of the art’ manufacturing and substantial ongoing investment will be needed if they are to be competitive in the longer term. Historically, state investment in semiconductor technologies by market economies has not been as successful as it has in more centrally planned economies where funding has been limited to a few private sector champions. However, this ‘pump priming’ by the overall investment in the entire eco-system for advanced manufacturing technologies anecdotally appears to be yielding a wider overall benefit to society, as over time the investment leads to unplanned gains across multiple sectors of the economy.
Geopolitical tension
Continuing very high levels of geopolitical tension have the potential to destabilise
the global economy and in turn, negatively impact global electronic components markets. The risk of armed conflict by Russia in Ukraine is already suppressing international stock trading, whilst global electronic components markets could be further impacted by the continuing tensions between China and Taiwan. Advice directed at the US military suggesting that “removing TSMC [Taiwan Semiconductor Manufacturing Company Ltd.] from the equation would make this tension go away” was greeted by knowledgeable insiders as “naïve at best and extremely worrying”. On the plus side the ongoing sanctions between the US and China over intellectual property protection rights that have done so much damage to the economies of both countries is beginning to force positive change, albeit at a snail’s pace.
Many large organisations are beginning to veer away from balance sheet ‘efficiency’ (lowest price sourcing) towards balance sheet ‘security’ (lowest total cost of ownership), in the process migrating away from single source China-based supply hubs in favour of diverse multiple geographic sources. China will of course remain an important manufacturing
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base due to its much lower factor (land, labour etc.,) costs and only a fraction of its current manufacturing output is likely to find its way back to the US or western Europe, but a wider geographic spread of manufacturing operations promises to benefit many other global economies.
Concluding thoughts
The global electronic components supply network remains significantly disrupted but competitive pressures are driving a recovery, probably within the current year. Over capacity cannot be ruled out and conversely, shortages in some components sectors should be expected. I remain convinced that honest collaboration up and down the network has the potential to contribute a great deal to supply security. Effective collaboration adds little to an organisation’s costs but the improvements it can deliver to its competitive advantage are immense.
For information
Adam Fletcher is chairman of the Electronic Components Supply Network (ecsn), a business association established in 1970 that today offers support to all organisations with an interest in
“…Promoting Positive Collaboration Throughout the Electronic Components Supply Network to Benefit Members and the Economy…”
electronic components throughout their entire lifecycle. He is also chairman of the International Distribution of Electronics Association (IDEA), an association of individual country electronic components associations whose objective is to arrive at and share best industry practice.
www.cieonline.co.uk
Components in Electronics
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