No one went through 2020 unaffected by the Covid-19 global pandemic that took the world by force. The global supply chain is no exception. How did Covid-19 affect electronics manufacturers? We reached out to our specialists to help us understand the impact that Covid-19 had on the supply chain and the bottlenecks it caused, specifically with electronics. Keep reading to see what they had to say.
Labor and Material Shortages are Widespread
Yes, Covid caused supply chain bottlenecks due to disruption in shipping lanes, decreased demand, and material and labor shortages, amongst other factors. Since supply chains are global and dependent on these factors, they took a significant hit, especially in 2020. Some of the worst-hit are the electronics, automobile, and construction industries.
When countries finally started to emerge from lockdown, the demand for products skyrocketed. These demands outweigh by far the factories’ abilities to satisfy them. The factories are also still unable to go back to full production levels due to the ongoing mitigation measures to contain the still present pandemic.
In addition to facing labor and material shortages due to Covid-19, the electronics industry faces a chip shortage caused by a decrease in production levels. With the shortage of this essential electronic input, companies are delaying launching new products.
Production facilities have been entirely halted in some cases, owing to a lack of materials and unavailability of the workforce. Some industries have also discontinued the production of non-essential electronic items and those that were near the end of their profit curve.
The increased demand and limited supply have caused a hike in prices while putting pressure on factories to produce more parts. Waiting time for deliveries has also increased as demand levels reach maximum capacity. Additionally, freight capacity on air and sea is still limited, increasing the cost further.
Decreased Production and Delivery Caused Delays
Yes, the Covid-19 pandemic caused supply chain bottlenecks. However, in the electronics industry, Covid exacerbated the problems as tariff wars between the U.S. and China had already put a strain on the supply chain, forcing some electronics companies like Kyocera and Nintendo to move to southeast Asia.
Due to the stay-at-home orders enforced worldwide, workers were locked at home, posing a logistics problem. Thus, the production of electronics parts came to a standstill.
Many e-commerce sites stopped the shipment of non-essential goods, including electronic products, to curb the spread of the virus.
As a preventive measure, supermarkets, malls, and showrooms of major brands were closed, thus affecting the supply of electronics goods.
Electronics Supply Chain is Out-of-Date
The pandemic caused supply chain issues in just about every imaginable manufacturing sector. Electronics manufacturers were hit doubly hard as most of their components come out of China. Some manufacturers shifted to surrounding Asian countries, like Thailand and Malaysia, but China remains the number one choice for many components.
There is some electronics manufacturing growth happening in Mexico, but it’s still in the infancy stage and not ready to sustain large demand yet. The pandemic exposed the electronics supply chain for the out-of-date system that it is. The entire system needs an upgrade to prevent this from happening again in the future.
Transportation and Logistical Issues
The Covid-19 caused a massive surge in demand for headsets, gaming PCs, and video conference systems, contributing to a world shortage of integrated circuits. As China faced widespread lockdowns, the transportation and logistics issues increased. This severely affected the supply chain cycle of electronic goods worldwide.
Shortage of Workers
Covid impacted the workforce by forcing large numbers of people to have to temporarily take work off due to being ill, and that shortage of workers has been one of the main causes for bottlenecks. When it comes to the supply chain, any issues that occur take a long time to fix. Similar to how a freeway gets backed up in one spot where an accident occurred, and it takes a long time to get back to normal speed, bottlenecks impact the supply chain down the road and make it difficult to fully recover.
Increase in Suppliers and Storage Costs
The COVID-19 caused significant disruption to supply chains as goods and commodities were produced in lower quantities. Respondents were being told to expect delays. Manufacturers had to seek alternative suppliers, and these were offering higher costs. There has also been inventory buildup, increasing the cost of storage.
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