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The Semiconductor Winter is Coming

Aug. 18, 2023
What will it look like, and how can component distributors best cope with its impact?

As the cold spreads, risk increases within the supply chain as some semiconductor companies reduce or even stop production. Key links in the chain, such as chip foundries and logistics service providers, might feel the impact directly, but shocks of uncertainty and instability could be felt throughout.

As demand reduces semiconductors will flood the marketplace, sinking the price. Under this pressure electronics manufacturers are likely to intensify competition—a move that could lead to price wars and a period of distinct volatility. The tremors of price fluctuations in the semiconductor industry will spread to affect the costs and profits of other components in the supply chain.

Inevitably production will slow to ease the congestion and lead times will lengthen. With chip manufacturers working to a longer delivery cycle, production planning and logistics processes will feel the effects. Delays in delivery will eventually affect morale in the end-user or consumer, leading to a stagnation of production and sales, which will negatively impact the entire supply chain again.

Unfortunately, as sales slow, so technological progress follows. During a cold winter for semiconductors some companies will need to reduce investment exacerbating technological progress. This is the worst possible scenario as it is the application of new technologies that will improve performance and efficiency of electronic products, thereby driving market demand.

The semiconductor winter will make its mark on the electronics supply chain; enterprises within it must address their supply chain risk management strategy and spread risk by diversifying through multiple suppliers and establishing supply chain partnerships. Stabilized companies that stand apart through technological advancement and product differentiation can use this time to get a lead on the competition.

Strategic emphasis on supply chain diversification has reduced Win Source’s dependency on any single supplier, enhancing the supply chain and benefitting from its flexibility. Having implemented the ISO9001:2008 management system, its new suppliers are subject to strict evaluation so that only dealers such as manufacturers, franchised dealers, OEM, CM, and independent and reputable distributors can meet the stringent standards and demands to become our supply chain partners.

Recognizing that the winter will bring shortages, Win Source has not only expanded its supply sources but also leaned into its optimized inventory management system to monitor inventory situation in real time. In this way, abnormal inventory of certain components is prevented; through an extensive global supply chain, components in short supply are continually sought out and inventories increased, ensuring that customer needs can be met in a timely manner.

In a bid to counteract the extended delivery cycles that will underline the semiconductor winter, life cycle surveys have been conducted on all products. Utilizing its big data intelligent system, Win Source can remind customers to stock up in advance. On upload of a BOM list, customers will discover which parts will or have already faced obsolescence, enabling redesigns to be carried out in a timely manner and avoiding prolonged delivery cycles.

The ultimate aim of Win Source is to keep technological progression moving forward for its customers and the health of the industry. So much so, Win Source has assumed more far-reaching social responsibilities: The company actively participates in some sponsorship activities, such as sponsoring on kicad, SMACD and other platforms, and providing free components to support the widest application of technological innovation.

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