Bumpy Road Ahead for Electronics’ ‘Roaring 20s’

The 1920s were marked by a surging economy and mass consumerism—and early in this most recent round of 20-something years, it’s been tempting to make a comparison between then and now. The road ahead for the electronics industry is likely to experience some bumps.

The first few years of the 2020s showed some real signs of health backed largely by consumer growth driven by increased electronics sales to people getting through the pandemic by working and playing at home. Now, the economy is struggling under increasing inflation in a way that has the pundits predicting a recession. The weakening economy has shut down the PC upgrade cycle and consumer spend, which in turn reduced demand, particularly for DRAMs.

However, the news isn’t all bad. It’s also likely that the tech industry will return to steady growth in the coming years. The automotive market continues to be strong—outpacing capacity. It’s little wonder:  According to estimates, the average modern car has between 1,400 and 1,500 semiconductor chips, a figure that goes up to 3,000 in electric vehicles. The global automotive microcontrollers market size is expected to grow from $10.67 billion in 2021 to $11.50 billion in 2022 at a compound annual growth rate (CAGR) of 7.86 percent, according to The Business Research Company. The global automotive microcontrollers market size is expected to grow to $15.75 billion in 2026 at a CAGR of 8.18 percent.

Managing constraints, then, is going to be a critical strategy in this decade.  Although lead times are softening, we are seeing them slide from 52 weeks to 41 weeks—still a long wait. Analog devices and microcontrollers are still notably scarce. Semiconductor makers are investing in fabs, but that capacity is skewed toward very high-performance nodes for processors, logic and memory. Investment in more mature nodes is scarce, indicating that there will be more supply demand tightness even as we enter a period of less volatility.

In certain sectors, such as industrial, telecommunications, aerospace and defense, parts obsolescence will be the biggest challenge going forward. For obsolete and hard to find parts, specialty authorized electronics distributors are going to be the go-to answer. Smart OEMs will build a strong relationship with a chosen specialty partner. These sources may have saved inventory from your chosen supplier or have parts with older date codes to keep manufacturing lines moving without being driven to source through unauthorized suppliers. They may also be able to offer a suitable alternative.

As obsolescence continues to grow, specialty distributors need to explore new ways of getting products into the hand of customers. For example, we are working with our suppliers to license manufacturing rights for certain discontinued products in order to deliver an equivalent private-label chip to our customers.

I’m optimistic for this new decade of the 20s, but this year is likely to be challenging. We’re going to have to work smart to get to the other side.

To read the article on EPSNews.com, click here: https://epsnews.com/2023/02/08/bumpy-road-ahead-for-electronics-roaring-20s/