It’s been nicknamed ‘Chipageddon’ and touted as one of the biggest strains on the global supply chain in recent years – the global chip shortage has caused major disruption and is continuing to upset supply chains around the world. Looking back to early 2020, Covid19 caused widespread panic as manufacturers immediately reduced their capacity, wrongly predicting that demand would decrease. But the unexpected happened and caught the manufacturers out – a bounce back. Huge domestic demand in China, the automotive industry, Play Stations and Xbox, and the huge increase in our dependence on electronic devices being used for remote working and home schooling all contributed to the demand suddenly skyrocketing, however by this point the manufacturers had already pulled back.

Other factors
There was also an internal issue – industry stocking habits that ultimately created added pressures. Car companies tend not to stock large quantities of supplies, and instead place a reliance on just-in-time delivery. Others, particularly Chinese companies, do the opposite and stockpile huge quantities of chips in anticipation of supply difficulties. By the time the pandemic had gone into full flow, car companies couldn’t get their hands on any chips and were shutting down, and this was only made worse by the speed at which others had stockpiled.

And its not always panic or pull backs that create the shortages – there have been two major fires at semiconductor factories in the last six months, each one having an impact on the market. Both have caused catastrophic ripples through an industry already stretched to capacity.

Allocation Market
Once the demand for the chips outstripped the available manufacturing capacity the industry moved to an allocation market, with the large broadline distributors letting their customers down by de-committing entire order books and pushing lead times out by months, leaving projects in dire straits and creating a snowball effect right down the supply chain.

How Princeps already helps customers like you
Princeps has the agility and ability to find traceable stock in the global market and we have never been busier. Not only are we finding traceable stock, but when the supplies dwindle as they undoubtedly do, our robust counterfeit mitigation process allows us to protect you from the risk of an open market – a far more appealing prospect than waiting upwards of 50+ weeks for the same component.

But there’s more at stake than just a disruption in the supply chain – the prices are going up and will only continue to rise at the same rate as the demand. Princeps recommends several ways our customers can stop this:

• Act fast – people with stock will know when their part becomes ‘hot’, inevitably pushing the price up. We regularly see overnight increases.
• Limit the number of partners that you work with.
• Place long term order commitments.
• Use a certified distributor with AS6081 and AS9120 accreditations and work with them to keep the lid on demand.

If you want to be assured of a continuous supply chain no matter what is going on in the world, you need to start working with Princeps.