Electronic Component Shortage 2024: Supply Outlook & Survival Plan

With supply chain news flying everywhere since early 2020, you’ve probably found it hard to translate the specific impact to your business.

Unfortunately, we predict lingering electronic component shortages in 2024, even though demand dipped at times in 2023.

Take the infamous semiconductor crisis. Industry lead time trends for these complex electronic components exploded from 8-12 weeks in early 2020 to an entire year in late 2022. (It's not all bad news -- delays got shorter late in 2023 and might continue dropping in 2024.)

What can your business do to address its specific product lines and shortages? Start by admitting the map you drew in January 2020 won’t help you find the treasure today -- there aren't so many fish in the seas these days.

There are at least five shortage influences you should be tracking. We'll also share five action plans for managing part shortages so your project avoids delays and swelling costs.

Why 2023’s Electromechanical Component Shortages Are 2024’s Problem

First, a quick recap of the electronic component supply chain issues specific to shortages.

Availability at both the material and product levels has continued to plague buyers. Why are electronic components in short supply still?

COVID’s Ripple

Don’t discount the effect that worldwide factory and mine shutdowns in 2020 and 2021 still have today. While production has nearly reached pre-pandemic levels, the industry is still feeling the aftershocks of raw materials sitting unmined and factories diverting schedules to produce COVID supplies. Just look at the semiconductor shortage.

Component Hogs

High demand in commodity electronic component markets – like auto, consumer, and IoT – have sucked up supply, leaving others to fight for scraps. During COVID's worst stretches, housebound consumers bought more personal electronics to pass time. Outside the home, vehicles have integrated more electronic technology, and “smart” appliance and tool manufacturing have taken off.

This competitive scene tapered off slightly in 2023. Data suggests the potential for a continued downturn in demand for electronic equipment and chips in 2024. 

Political Conflicts

Russia is a major supplier of metals and minerals common in electronic parts, and war sanctions wrecked the flow of that supply. The impact is on both sides – Ukraine’s top two semiconductor-grade neon producers, responsible for 90% of U.S. supply, closed their doors when attacks began in early 2022.

Israel, a major semiconductor maker, is another political trouble spot to watch.

Who's Going to Make Them?

In a sad bit of irony, lead times for chip-making equipment is at 18-30 weeks. (At least it’s improving from the 18 months buyers experienced in 2022.) What's worse, there's a lack of skilled electronics laborers to fill these factories, forcing some of them to delay launch.

As for the parts themselves, they're ... tricky. The complexity of their manufacturing process, which can take up to 6 months, is partly to blame for the crisis.

Again, the issue is one of not just product shortages, but also labor and material shortages. No copper means selecting industrial cable gets harder. No resin means no plastic for vital components of an assembly. So, what’s a sourcing employee to do?

How to Plan Around Electronic Component Shortages in 2024

Your company needs supply chain expertise more than ever, so it’s time to take matters into your own hands. Steps you can take to navigate the choppy seas of electromechanical parts procurement include:

1. Follow basic inventory management best practices
2. Use component database software
3. Work with an awesome distributor
4. Reshore
5. Adapt your design

1. Follow 2024 Inventory Management Best Practices

Electronic component inventory management has changed, and your life will be easier if you change along with it. Despite the constraints of this shortage, there are more ways than ever to be proactive and flexible:

• Consider component availability in the design phase: Early in your project’s timeline, look at what’s available now and what you expect to be available closer to launch time.
   
• Use multiple sources: Once a luxury, a second (and third?) source is a must-have today. Options are limited, and your ability to quickly work with an alternative supplier can win the race against deadlines. There are distributors and software that can help you tap these veins of valuable components.
  
  
• Make large, blanket orders: During the development phase, buy enough components (with forecasted release dates) to clear initial production run estimates. This way, you can launch immediately once testing validates your design.

More than ever, inventory management is about thinking well ahead. Even when you’re not making a blanket buy, you should still order far in advance.

If you’re ordering a vital part that could shut down production if unavailable, stock up even more. This is especially true for sellers of mission-critical technology and other industries in which delays are unacceptable:

• Automotive
• Defense
• Aerospace
• Energy
• Datacom
  
  

2. Use Component Database Software

This is the source for the electronic supply chain news that actually matters -- last-time buys and shrinking stockpiles.

What better way to juggle that data than to let technology do it for you?

Third-party component databases (i.e. SiliconExpert) offer a looking glass into millions of components from thousands of suppliers. Its uses include:

• Obsolescence forecasting – Advance notice on shortages & life cycle changes
• Inventory data – Real-time looks at availability, matched to your bill of materials
• Compliance info – Notices on restricted & conflict materials

Use of a verified and constantly updated database also minimizes order-specific issues, such as counterfeit batches. 

Investing in electronic component software gives you a valuable map that steers you toward faster quotes and designs you nail the first try.

3. Work With an Awesome Distributor(s)

While single-sourcing a critical component is increasingly risky, leaning heavily on a great distributor for your broader supply needs is a crucial move.

When you’re desperate for electromechanical components, you’re at greater risk of low-quality or fake parts entering your inventory. Working with trusted electronics suppliers that vet sources and trace component history can keep bad parts away from your design.

Consider all that a contract electronics supplier can accomplish (while you focus on a successful launch):

• Inventory management – Finds additional sources for key parts
• Forecasting – Mans the database software and alerts you of life cycle changes
• Warehousing – Stockpiles materials to avoid build delays and higher costs
• Franchise pricing – Gets discounts you could pass on to customers
• Turnkey – May speed up turnaround by offering other services like component kitting

During electronic component supply shortages, your sourcing partners decide whether to prioritize you for the above. That makes electronics distributor relationship management a huge factor in your success.

No matter the relationship, it’s always best to engage early and often. Don’t swim to a supplier’s ship during a crisis and expect a lifeboat on-demand.

4. Reshore Your Electronics Manufacturing Supply Chain

The longer your electronics supply chain is, the more prone it is to snags. If yours stretches beyond U.S. borders, consider reshoring your component supply chain.

Keeping your component stream in America can improve:

• Lead times – Avoid orders being tied up in customs, sea storms, & tariffs
• Quality – No counterfeit parts; no damage during long-distance shipping
• Communication – Fewer language and time zone barriers

Earthquakes in the Middle East? Pirate attacks off the China shore? Both affect your production less when your partners work in the Northeast U.S.

5. Adapt Your Design

Some of the best improvements you can make to your electronic component sourcing situation are at the engineer level.

Adapting your design for component availability is possible in more ways than you might realize:

• Redesign – Remove a non-essential component causing delays
• Replace – Use a more common material or component for your missing or obscure part
• Reprioritize – Is it easier today to improve an existing design vs. releasing a new one?

If it hasn’t already, your design team should train its brains to pivot efficiently. What’s the closest component available that still meets your specs? Can the engineers make this alteration work?

Anchoring inventory management to your design process takes effort from several teams. Procurement, supply chain management, design, and production folks should all have visibility into the state of the project – and its components. Involve your design team in supplier discussions, investment plans, and technology road maps. Your product design will evolve for the better.

Where Will You Steer Your Product Line in 2024?

Instead of asking why there is a shortage of electronic components, start how you'll be ready for the next one. You’re manning the ship – blaming outside forces will only get you so far. Your company will struggle to meet production goals if you don’t take supply and demand just as seriously as you did in April 2020.

Pin-to-pin replacements, drop-in replacements, and other design pivots may cause a minor headache initially, but they sure beat the alternatives: manufacturing downtime and panic. And you may be able to avoid redesigns entirely if you’re proactive.

A lot of your success in sourcing electronic components will revolve around developing a healthy supply network. Early communication is key – don’t wait until you’re lost at sea!

To learn what to expect from an electronic component distributor's supply network, see our manufacturer list: