The semiconductor crisis has been going on for two years now. The approximately $550-billion-industry is becoming increasingly important considering the worldwide ecological and digital transition. Many are suffering from a limited offer that cannot keep up with the demand, so companies are looking for different ways to keep production lines running.
Since the end of 2020, a serious shortage of microchips has been affecting many industrial sectors and the main problem is that demand far exceeds the global production capability, so the total offer consequently. The crisis has various reasons, partly economic and partly political; structural and conjunctural. The following three structural factors are the main causes: the improvement of 5G technology; the production of electric cars and the growing importance of chips in the Internet of Things. Also economic factors played their role including the pandemic, the drought in Taiwan but also the misjudgment of technology industry. In fact, the significant increase in demand has been based mainly on inventories, taking late decisions on the increase in production. Finally, the reasons for the crisis can also be explained through trade and geopolitical tensions: trade tensions between China and the United States; the war between Russia and Ukraine, which are also suppliers of chemical gases such as C4F6 and neon, essential for the production processes in the semiconductor supply chain.
Promotech: great stock availability, problem-solving ability and efficient repair service
The European Parliament has already confirmed its position and is ready to start negotiations with EU governments to issue the European Chips Act (or European Semiconductor Law) which aims to increase the production of semiconductors in Europe. Furthermore, in February 2023, MEPs adopted the Chips Joint Undertaking: an investment programme whose aim is to support the growth of the sector and promote medium- and long-term EU leadership in this field.
Will this come to an end? To customers and suppliers, the current acute shortage of devices is expected to continue at least in 2023 and perhaps onwards. Overall, though, the data show that the industry of electronic components is registering another highly productive year, with a strongly increased demand. In fact, the Semiconductor Industry Association (SIA) argues that “the demand for semiconductors is expected to increase significantly in the coming years, as chips are getting more integrated into essential technologies”. We are witnessing a constant demand in all vertical markets, due to the fact that products used also in industrial automation are becoming increasingly smart. This leads to a multitude of new applications across all sectors, including smart factories, experiencing the so-called Fourth Industrial Revolution.
Are the lead times expected to improve? The delivery times are showing slight signs of improvement. However, the supply chain instability and inflationary pressures are supposed to persist all over 2023. Customers place orders many months in advance, if they can, but most of the time we find ourselves facing delays in deliveries being up to 8 months.
How can designers and buyers manage the lack of supply of automation components? Developers and customers are always looking for solutions to manage the shortage of electrical and electronic equipment for industrial automation. Designers and buyers have to examine purchases on sales, carefully planning the receipts of raw materials and components. They work with trusted distributors, such as Promotech, sharing their medium-long term production plans. In order to achieve this, the distributor has to risk its possessions being financially solid. This can increase its stock levels.
Is a plan based on the Design for Availability at the first stages a valid solution? Yes, it is. It can avoid too long lead times or higher costs for a new planning with alternative components. If the designers cannot get the necessary components, then alternatives will inevitably be found. But if this solution is considered at the very beginning, it will be easier to implement the ‘plan B’. Over the years Promotech has built up a team of technicians who, in synergy with the most important brands in the world of automation, have been able to identify alternative solutions, meeting all the customer’s needs.
What are the consequences on the industries? Industries carry out an ordinary and extraordinary maintenance, including preventive maintenance. By maintenance we also mean preventive maintenance with strategic and planned purchases by collaborating with distributors who are increasingly asked to manage the warehouse with methods such as Consignment Stock or Call-off stock.
Is collaborating with an automation component distributor so important for a player? While the shortage of parts may have been a new experience for some, distributors have already faced this problem many times before. At Promotech, we are always ready to help customers solve their procurement problems. Promotech today places itself on the market as a leading company in the sector with a vision that goes beyond the simple supply. With more than 20 employees and 25 years of experience in industrial automation, Promotech intends to fully meet the needs of customers with a series of services that allow us to overcome the current crisis.
A large warehouse, including a ward dedicated to obsolete products, a 24-hour service to solve a machine downtime that may occur but also a repair service allowing machines to be restarted if the delivery date for spare parts is quite long. A network of partners and suppliers and a young and dynamic team is able to always find suitable solutions for our customers.
Leader in the distribution of electric and electronic equipment for automation