As the COVID-19 pandemic continues to take its toll on human lives, livelihoods and economies worldwide, the electronics industry is making moves to shore up supply chains and ensure a smooth transition when commerce returns to a more normalized state. The component shortage that took hold long before the pandemic emerged is making that task more difficult for manufacturers and distributors alike.
“Shortages of components and raw materials because of the coronavirus are likely to be far worse than expected, with most US companies unaware that they are exposed to Chinese factories idled by the outbreak,” Financial Times points out. “I guarantee you that most organizations have some level of exposure that they are not aware of,” Ivalua’s Alex Saric told the publication.
Close Tracking
Financial Times goes on to explain that while companies closely track their direct suppliers—the tier ones such as Foxconn that sends Apple a finished iPhone—“they can be blind to their suppliers’ factories, the tier twos, and those further down the chain.”
In fact, it says one Bain & Co. analyst estimates that 60% of executives lack any supply chain visibility beyond their tier one suppliers. This can become a major issue in a world where Resilinc says about 1,800 manufactured parts originate in the quarantined areas of China that are centered around Hubei province.
“The scariest thing we see is the highest numbers of parts [made in and around Hubei] are caps and resistors — tiny things nobody cares about — plus thermal components, plastics and resins, and sheet metals,” Resilinc’s Bindiya Vakil told Financial Times, which advises companies to prepare now for six months of supply chain disruptions.
Back to China
With its role in the national pandemic now waning, China is becoming a focal point for electronics makers that are scrambling to shore up their supply chains. According to Forbes,
iPhone maker Foxconn says its China plants can meet seasonal demand after finding enough workers since the country shed the worst of its coronavirus outbreak in February and early March.
“Demand could surface in China, too, as companies there start placing orders again for domestic consumers who can go outside now after a dismal February,” Forbes reports. “Foxconn will still keep China as [its] manufacturing base and focus on the domestic market for their consumer-facing business, whether it be brand or channel,” Quantum International’s John Brebeck told Forbes.
The Verge says Foxconn was at reduced capacity for most of February and is hoping to get back to full strength by the end of the month. “But with so many other manufacturers still scaling up, the result is a huge disruption in the supply chain,” it points out in “Electronics companies are getting gridlocked by coronavirus lockdowns.”
The situation is being made worse by the structure of modern manufacturing, The Verge adds. “For decades, hardware companies have been cutting costs by reducing stockpiles, trying to minimize the time a product spends sitting around at any stage of the process,” it reports. “That magnifies the impact of any disruption to the system, whether the component can’t be built because the workers are locked down or can’t be shipped as fast because of travel restrictions.”
India Makes Emergency Moves
Last month, India made a commitment to support its growing electronics sector by arranging to airlift components from China, all with the goal of containing the fallout from the coronavirus crisis in China. As Venture Beat reports, India’s federal technology ministry asked electronics and smartphone industry lobby groups to draw up a list of components made in China, which then can be airlifted.
“China is slowly getting back to work after an extended shutdown, but it is still grappling with a range of production and logistics delays,” the publication adds. Electronics manufacturing, especially the assembly of smartphones, is a bright spot for India’s otherwise flagging economy, it says, although the country remains dependent on China for components such as camera modules and display screens.
“The emergency airlift plans underscore the interconnected nature of global supply chains and the continued dependence on China for key goods,” it continues, “even as some manufacturers — prompted in some cases by the U.S.-China trade war — move to build up capacity outside of China.”
