How Can You Overcome Current Lead Time Increases?

How Can You Overcome Current Lead Time Increases?

The trend of above-average demand for electronic components has continued during the first quarter of 2018, causing overall market availability to decrease, manufacturer lead times to rise and some products being placed on allocation.

Because of this, we would encourage everybody to work with their CEM to compensate for these tricky market conditions. The situation is unlikely to improve in the short-term and shortages may become more apparent as we head towards the second-half of the year.

Workable lead and production times can still be achieved. However, with market availability for many commonly-used parts decreasing, effective planning is more critical than ever.

In an article published last year, we noted that global semiconductor demand had increased and was impacting on the component supply chain. Twelve months on and little has changed; demand continues to be high and semiconductor manufacturers are either close to reaching or have reached production capacity.

Data released late last year by one global distributor showed that around 50% of the passive components it sold was subjected to a lead time increase. For discrete semiconductor, the percentage rose to 63% and for memory items, 70% of products were affected.

One of the major reason for this is that entire market has gone into overdrive.

Semiconductor manufacturers have been unable to keep up with this increase, leading to the availability of many parts to massively decrease.

Our first-hand information is that lead times are especially high for Murata, Kemet, Texas Instruments and Vishay parts, specifically capacitors, resistors and some ICs.

This is reflected in average lead times, which have increased by a worldwide average of 13% in the past eighteen months. For resistors and capacitors, however, the rise has been greater, and some product lines are now being quoted out at near-record levels.

Perhaps predictably, this has led to some analysts to sound the alarm and suggest that a period of widespread allocation could just be around the corner. Though, at this moment, we don’t believe that this is going to be the case.

However, there is no doubting the reality that the semiconductor marketplace is extremely volatile and that is something that will need to be accounted for.

There are numerous steps that project managers can take to minimise the disruptions of a long lead time market.

The most obvious one, perhaps, is to adjust timeframes to compensate for the increase in lead times. However, in many cases where popular parts are being quoted out in months rather than weeks, this may not be feasible.

Instead, it may be beneficial to explore the use of substitute parts. In some situations, even redesigning the board to remove those long lead time components could be the best solution, especially if some parts are likely to become obsolete in the near future.

Whatever you decide to do, we would still recommend that you send all enquires over so that we can get the ball rolling. The sooner that we can start the costing and procurement process, the sooner the boards will be ready for assembly.

With demand for capacitors, resistors and ICs likely to remain high, we are not expecting lead times to contract in the short-term. It is not an ideal scenario but with the right planning and support from your CEM, you can protect your production plans from the volatile market conditions.

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