As the coronavirus continues to spread rapidly around the world, many major manufacturing-focused countries such as the United States, South Korea, Japan, Italy, Germany and others are reporting new cases. Some of these countries, including Canada, have issued restrictions on travel and even suspended some business operations.
In this rapidly changing environment, the threat to the supply chain has the potential move from final assembly to the electronic component level. The impact of a component shortage will not be limited to lead time, as our last newsletter predicted, but will also impact pricing.
In a market condition report we received from a major component supplier, we noticed that resistor, capacitor, memory, and Wi-Fi modules are the four main technology categories in which price has the tendency to increase across all manufacturers. For example, Yageo, which is a Taiwan-based capacitor manufacturer, has issued a letter to all customers to increase some MLCC capacitor and resistor prices by up to 30 percent. If the global pandemic cannot be effectively contained in the near future, we expect more South Korean and Japanese manufacturers will adjust their price accordingly.
In order to secure final production, we at Avnan would like to proactively move forward by asking customers to – if possible – provide us their forecast extended to the end of year 2020 and issue purchase orders as early as possible if the demand can be confirmed.
For our customers who design and control their own products, our engineering team is happy to present options in the form of alternate component suppliers, alternate part numbers that are perhaps higher-performing (but still drop-in replacements), and even alternate technologies. This strategy will give you and Avnan more bargaining power to negotiate the best price possible in the market.
At this time, China is slowly returning to work. However, restrictions and some lockdowns are still very much in place. If you have existing projects underway in China, please keep in mind that Avnan has boots on the ground throughout the country, and we’re happy to assist you with any projects that might need attention.
We will continue to communicate with you throughout this critical situation. Your supply chain safety will always be our priority.
We invite you to contact us if you have any questions or concerns.