Front End | Electronic Components Supply Network
A ‘curve ball’ for the electronic components supply network
As predicted over the last six months or so organisations across the global electronic components supply network are facing new and unexpected challenges in 2022, but Russia’s invasion of the Ukraine was a very low ball on everyone’s radar. No one saw it coming and no one could anticipate such a dramatic escalation. The conflict is already having significant macro-economic impacts on global trade and is negatively impacting the forecasted international GDP growth. That said, Adam Fletcher, chairman of the Electronic Components Supply Network (ecsn), believes that the conflict will have limited impact on the manufacture of electronic components for global markets but is likely to increase logistics delays that will inevitably trigger supply problems for manufacturers of electronic equipment, cars, trucks and chemicals
Russian electronic components market
The Total Available Market (TAM) for electronic components in Russia is a similar size to the UK TAM of US$ 4.204M, which on a global scale is surprisingly small given the size of the country. Whilst there are components manufacturers in Russia, they are generally small operations focused on serving their domestic market rather than manufacturing for export, so the country is heavily reliant on the import of components from the rest of the world.
Russia’s largest domestic semiconductor manufacturer is JSC Mikron, based in Zelenograd just outside Moscow. Primarily a manufacturer of chips for passports, bank cards and RFID applications Mikron uses process technologies, which by today’s global standards are considered to be several generations behind ‘state of the art’. The picture (on the opposite page) shows Vladimir Putin with members of the Mikron management team when the Russian President visited the company in 2010. Like here in the UK, most customers for electronic components in Russia are served by local authorised distributors who represent a wide range of international components manufacturers and in many cases are also Contract Electronic Manufacturers (CEMs). The few international distributors with offices in Russia are generally focused on supplying and supporting their local operations. Similarly, the few international components manufacturers active in Russia are mainly involved with supporting local sales, marketing and applications functions, although some do have limited product development operations.
10 March 2022
Ukraine electronic components market There is little data available on the Ukrainian electronic components TAM but anecdotal data suggests it doesn’t exceed circa US$ 450M. Data is hard to come by because although goods are destined for delivery to Ukrainian manufacturing sites much of the purchasing and invoicing activity of the country’s larger CEMs and OEMs happens in Germany. It’s fair to say that - in common with several of the larger eastern European countries - Ukraine has significantly benefited from reshoring from Chinese- to European-based CEM manufacturing. Traditionally, the Soviet Republics (Russia,
Components in Electronics
Kazakhstan, Belarus) have been Ukraine’s principal export markets accounting for 60 per cent of all exported goods, with China accepting a further 13 per cent and Germany 10 per cent.
Ranking among Ukraine’s top five exports, the country is a key producer of the wiring harnesses used by many European car and truck manufacturers. It’s very proficient in producing these assemblies in high volumes against very short lead-times for just-in- time (JIT) delivery to customer assembly operations. Transferring production of these highly proprietary custom products to sites outside the Ukraine will take many months and a lot of logistical effort.
Transportation and logistics Except for pharmaceuticals, healthcare and humanitarian supplies, most large international transport and logistics organisations have halted shipments from Russia. Flights in Russian airspace have been grounded and sea freight to Russian ports has been embargoed, all of which must be knocking onto rail freight shipments too.
Rail freight movements from China are important to Russia: Heavily promoted as part of the ‘Silk Road’ initiative they have become a favoured method of moving mid-weight or bulky goods such as PCBs, power supplies, fans, metalwork etc., transiting from China across Kazakhstan, Russia and into Poland,
www.cieonline.co.uk
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