IC Trends Blog | Electronic Component Supplier News

What Does 2012 Hold in Store for the Electronic Components Supply Chain?

As we launch into the new year (it's February already!) I thought it might be a good time to take a look at what transpired last year for the electronics supply chain and see what that might mean for the New Year.  Although acts of God are terribly difficult to predict, there is one thing that we can count on.  They will happen.  We are never sure when and where, so we have to be prepared as best as we can with the limited resources that we respectively possess.

To start with, it might be a good idea that major technology parks aren’t build on flood plains.  In speaking with one executive of a major hard drive manufacturer over the holidays, it was apparent that they had no contingency plans for such an occurrence, nor did most of their suppliers and competitors. Consider the fact that large floods have occurred along Bangkok’s Chao Phraya River in 1942, 1978, 1980, 1983, 1995, 1996, 2002 and 2006.  You would think that this might have been a warning to the government planners and companies that chose to locate 45% of the world’s hard drive production in a potential disaster zone of one of the key components (hard drives) not only to the personal computer industry, but to the electronics industry as a whole.  Perhaps this is another example of government policy distorting markets given the rich subsidies that the Thai government has provided to the electronics manufacturers for locating in Thailand.

 

(Picture credited to NYTimes.com, article by Thomas Fuller, Published: November 6, 2011)

Going forward, I think we can see some specific efforts to avoid these situations.  Here are five trends that we think will impact the electronics supply chain:

• There will be efforts made by companies to avoid relying on a narrow source of supply, whatever that may be.  Companies will work to make their supply chains more dynamic  to meet customer’s actual and perceived demand.  Whether it is a reliance on a specific source of power in the case of the Japanese tsunami in March or the concentration of manufacturers and their subcontractors in one area in Thailand in November.  This is in contrast to the initiatives by companies to reduce their approved vendor lists over the last several years.

• The floods in Thailand will be largely felt in the first and second quarter of 2012.  Most customers already had their materials in stock for the end of the year.  The real impact is will be felt in the coming months.

• As a result, the supply chain will become more fragmented and subject to more disruptions in the short run.  That will place a great deal of strain on procurement departments to meet supply in a lean manufacturing/just in time environment.

• Given the reluctance of component manufacturers to increase capacity and production and the availability of product on the open market, if there is any uptick in demand there is likely to be shortages as a result.  Given the prevalence of counterfeiting, it is very important that companies engage with distributors that can provide the necessary safeguards to protect their supply chain from potential quality issues.

• The continuing rhetoric out of Washington bashing business and the 1 percent will continue to be a drag on corporate spending and will not be resolved until the election.

These are just our observations.  For additional thoughts that you have or to find out more about IC Trends please go to www.ictrends.com.

Takeaways from the Symposium on Counterfeit Electronic Parts (Part 2)

Last week I attended the Symposium on Counterfeit Electronics Parts.  The defense industry has awakened to the very serious problem of counterfeiting.  And although there are great efforts underway to coordinate information amongst the participants in the electronics supply chain, there are still significant obstacles to overcome.

The most fundamental of those are the differences between the life cycles of the weapons systems being built and the life cycles of the underlying electronic components.  Weapons systems designed to last decades are incompatible with the pace of technological change in the electronics market.  Unfortunately, there does not seem to be an easy answer for this.  Prime contractors are expected to build obsolescence planning into their budgeting process, but that will not be an easy task and will be very time consuming.

On the positive side of things, it appears that the industry is embracing all of the channel partners and understanding the value brought to the supply chain by all of the players as well as encouraging communication amongst the various stakeholders.  Obsolescence issues are very pervasive in the defense market, so it is imperative that the market participants exert as much diligence as possible to insure that counterfeiting is combated at every opportunity.

Takeaways from the Symposium on Counterfeit Electronic Parts (Part 1)

Last week I attended the Counterfeit Electronics Parts Symposium in Anaheim.  I had attended a similar symposium in July of 2010.  Although no two groups can seem to agree on the definition of what a counterfeit part is, it does appear that the industry has begun to focus resources on the problem.  Even Congress has gotten into the act as the Senate has passed the “Counterfeit Electronics and the Defense Authorization Bill.”  Use this link to read about this new counterfeit electronics bill.  This bill will put the onus and cost of repairing and replacing counterfeit components on the contractor that builds the weapons system.  It would also carry severe criminal and civil penalties for those involved in the selling of counterfeit components.

The opportunity for counterfeiting in the defense industry primarily arises as a result of the different life cycles of the weapons systems and the electronic components that make up those weapons systems.  Most weapons systems are designed to last decades.  However, the life cycle of the electronics that go into those weapons systems are much shorter.  In many cases the life cycle of the components are three years or less.  Therein lies the problem and the inherent opportunity to introduce counterfeit material into the supply chain.  In addition, the requirement for leaded parts for many military applications exacerbates the problem as the industry continues to move away from harmful chemicals contained in the components.  Since many components are no longer available from the manufacturer or authorized distributor, contractors are forced to purchase material on the open market and that is where things get dicey.

Adding to this mix are electronics waste recycling efforts.  Much of the e-waste generated in the US is sent to China for recycling.  Product sent to China is then recycled by peasants, with the components being reclaimed from the printed circuit boards using archaic methods.  Those components are then sent to Shenzhen and resold as new product, in many cases with the component being resurfaced or “blacktopped” and possibly even remarked as a different component.  Those parts are then sold on the open market.  And depending on the level of diligence conducted by the suppliers and contractors, the product may end up being installed in a weapons system.  That is the vicious cycle that creates the opportunity for counterfeiting.

Continued Flooding Interrupts Supply of Electronic Components

As the flooding continues in Southeast Asia, electronic component manufacturers are feeling the effects of the unfolding tragedy.  Hard drive manufacturers and electronic component manufacturers are reporting production stoppages and supply issues for the fourth quarter.

Since July, more than 80 percent of Thailand's 77 provinces have been flooded, submerging more than 10,000 factories.  Western Digital, Sony, Rohm, NXP, and Panasonic appear to be heavily affected.

Sony currently has two of its three Thai facilities closed.  Western Digital has closed all of its Bangkok area factories.  WD shipped more than 50 million drives last year and employs some 37,000, now left without work for the short term.

The cleanup from this disaster brings additional concern.  With much of the manufacturing equipment and entire assembly lines underwater, extensive repairs and in many cases replacement of machinery will be required before resuming production. 

Electronic component supply will continue to suffer as production remains on hold for many factories.  Many component manufacturers are facing losses for the fourth quarter, and have downgraded their production forecasts.  This will mean an increased need for finding suitable replacement electronic components in order for product manufacturers to minimize their production risks.

Affected Factories:

• Avago Technologies Pte.
• Benchmark Electronics Inc.
• Fairchild Semiconductor International
• Hana Semiconductor
• Marvell Technology Group Ltd.
• Microchip Technology Inc.
• Microsemi Corp.
• NEC Corp.
• NXP Semiconductors N.V.
• ON Semiconductor Corp.
• ROHM Semiconductors
• Sanyo Semiconductors
• Seagate Technology LLC
• Sony
• Texas Instruments Inc.
• Toshiba Corp.
• Western Digital Corp. (WD)

How the Flooding in Thailand Impacts Component Supply

As the flooding continues in Southeast Asia, the electronics supply chain is beginning to feel the effects of this unfolding tragedy.  Hard drive manufacturers and component manufacturers are beginning to report upcoming production issues for the fourth quarter.  Western Digital, Sony, Rohm, NXP, and Panasonic appear to be the companies that are initially effected.  We will monitor the situation and provide updates as they become available.

For more information, view Marc Herman's article "Thai Floods Devastate Supply Chain."

6 - 8 Reasons Electronic Component Counterfeiters Love Their Jobs

How the World has Created an Ideal Climate for Counterfeiting

"Chip Sanding" taken from www.combatcounterfeits.com/gallery.htm

We know about, we’ve talked about, we’ve blogged on the subject of the massive problem that counterfeiting is to the component industry.  In fact, according to Lev Shapiro in his article “Counterfeit Electronics: Threats, Risks and Prevention Practices”, on March 16, 2010, “Statistics places electronics fourth in terms of total seizures by category, after footwear, clothing and pharmaceuticals.”

Judging by how many fake Gucci purses and Nike shoes that we see being peddled on city streets, it’s shocking to see components counted in the same ballpark.  Also in Shapiro’s article, he unpacks why there is such a favorable climate for counterfeiters at this particular point in history.

He lists these as:

1. Weak legislation and enforcement in the countries of low cost economies, especially in China. Enforcement of anti-counterfeiting legislation in these areas is very lax. China has a conviction rate of approximately 5% (China State Administration of Industry & Commerce Annual Statistics).
   1. Since China is the primary area of concern that IC Trends has targeted for counterfeit components, this is a huge problem 
2. Little cultural concern about protection of Intellectual Property (IP). Regulation of exports in China has been relaxed significantly in recent years, causing a large increase in counterfeiting.
3. Developed technology and the growing sophistication allows counterfeits to be produced at far lower cost.
4. Huge accumulations of electronic scrap has become the source of used components and counterfeits. Verification of scrapping is not simple and many scrapped components without adequate control during disposal may find their way onto the grey market, presenting a real problem for Original Equipment Manufacturers (OEMs) and Contract Equipment Manufacturers (CEMs).
   1. See the blog “Electronic Shortages…Again…” for a more detailed account of the increase in raw materials and its effect on the component market 
5. Global outsourcing and a complex supply chain--in many cases spanning multiple partners spread around the globe.
6. Internet commerce. Internet is a market place allowing buyers and sellers to make fast trades without even meeting "face to face." Under such trading, people don't know who they are doing business with. You can buy from a company, pay for the goods and by the time you find out that those components are faulty, the Web site has closed down and the company disappeared. Broker's Forum, an Internet trading platform, has about 3,500 members. Only a few of them have supplier relationship or product inspection programs, leaving many opportunities for counterfeit product entry. The Internet has become the preferred distribution channel for counterfeit and grey market goods because of the low barrier to entry, ease of use and world wide coverage.
   1. Also for reference, see the blog “Your Electronic Component Supplier – 3 Signs You Can Trust Them.”  Offline and especially online, your supplier has specific criteria they should meet to earn your trust and business.
7. RoHS and WEEE requirements create additional opportunities for counterfeiters. They may provide paperwork stating that devices are compliant with the European legislation for old leaded components or offer the lead-free parts to exempted industries that need components with SnPb plating for their high reliability products.
8. Counterfeit has become an extremely profitable business, generating income that can compete with narcotics and weapons trafficking, but at much lower risk.

The climate is right for counterfeiters and with the ever increasing demand it’s easy to see how buyers can run into obstacles.  At IC Trends we’ve been blogging about counterfeiting with increasing intensity over the last year.  Following the CALCE conference we resolved to put additional measures into place to make sure the components we supply for our customers are untouched by counterfeiters.

Here is an update on what we’ve done and how we’ve done it.

• Protecting our customer's supply chain - Increased our inspection capabilities, including increased investment in equipment and training
• Limiting risk by dealing with quality suppliers - Reduced the number of vendors that we purchase from in mainland China
• Stopping the problem before it becomes a problem - Having all product originating in mainland China inspected and tested prior to the product being shipped to our facility
• Building relationships - Personal visits to Chinese vendors to asses their quality controls and to personalize relationships
• Online search capabilities - Continued investment in our MarketMaker® online search capabilities to indentify quality vendors and product

 

Electronic Component Chip Supply Impacted by Japan's Disaster

 

In the Wall Street Journal 11 hours ago, in "Lenovo Says Chip Supply Could Hit Tablet Shipments," Owen Fletcher says

The article goes, as do other online sources, to speculate on this shortage's impact on Apple specifically, but all DRAM utilizing devices.

We wrote about DRAM last week and it looks like it's going to continue to take a hit.  We've seen the requirements for DRAM components rise dramatically as people scramble to meet their requirements.  If we can offer you the same assistance, please contact us or search our online MarketMaker database see the latest availabilities.

Electronic Component Collision…Seiko…Murata…Nichicon…Toshiba…Koa…

More and more information coming out of Japan says that the electronic component industry will be one of many impacted greatly by the earthquake and tsunami.  Below is detailed information on the current effected electronic component manufacturers. 

We are seeing huge shortages for Seiko, Murata, Nichicon, Toshiba, and Koa specifically.  If you have these, or any of the below, in your bill of materials currently you need to start looking for a cross or alternate immediately.  Our phone lines are open (and busy), and our email inboxes are ready (and filling up rapidly) to help you plan for and solve these shortage situations.

Click here to search and find these impacted components.

Current Effected Manufacturers:

Alps

The Headquarters（Tokyo, Ota-ku） and the Nagaoka Plant (Niigata Pref. Nagaoka City) will be operated as usual.
Because of the stop of the infrastructure such as electricity and water service etc., we decided that the Furukawa plant (Miyagi Pref. Osaki City), the Wakuya plant (Miyagi Pref. Toda-gun), the Kitahara plant (Miyagi Pref. Osaki City), the Kakuda pplant (Miyagi Pref. Kakuda city), the Onahama plant (Fukushima Pref. Iwaki City), and Sendai Development Center (Miyagi Pref. Sendai City) will be closed on 14th and 15th, and the Taira Plant (Fukushima Pref. Iwaki City) on 14th. We make best efforts for its restoration.

AVX

AVX sells and services, outside of Japan, certain products produced by Kyocera Corporation and in general those products have not been significantly impacted. Most of Kyocera’s factories are located in the Southern Island which was farthest away from the natural disaster.

A facility located in Northern Japan that produces crystals for oscillator products is the only one to sustain any damage. This factory [Yamagata], has limited power at this time and Kyocera is assessing the options to restart operations as soon as possible.

Bourns

Bourns, Inc. (“Bourns”) has employees located in Japan and certain Bourns® products are manufactured for Bourns in Japan.  At this time, Bourns believes that delays, if any, of shipments of Bourns® products to its customers will be minimal.

Cooper Bussman

No Current Impact to Cooper Bussmann- Global Operations, Raw Materials or Transportation Routing Related to Japanese Crisis.

Hirose

See attached “Affected Products List”.

Two subcontractors’ facilities have been damaged beyond repair.  This has serious implications in our ability to supply a number of products for the forseeable future.

Kemet

Kemet operations not affected by Japan earthquake and Pacific tsunami

KOA

Partial closing down of KOA facilities due to the impact caused by the earthquake.

Tokyo Electric Power Company announced to enforce programmed power supply cut in its jurisdiction area which includes city of Tokyo.

We will close the below facilities today because of the above reason.

<KOA closing facilities dated March 14th, 2011>

・KOA Corporation’s Sendai Domestic Sales and Mito Domestic Sales offices.

・Tama Electric Co., Ltd. Fuchu facility, Tokyo

Molex

Molex has a long history of doing business in Japan and has two major manufacturing facilities and a design center located there. We wanted to let you know our employees in Japan are safe and that none of our three facilities were damaged in the massive earthquake that struck Japan on March 11, 2011. Our operations, which are in Shizouka, Kagoshima and Yamato City, are well south of the northeastern part of the country that was hardest hit by the earthquake and tsunami.

Murata

Effected Products:                  

EMI Suppression Filters, Coils

Damage situation:  

There is no personal suffering. Damage is seen partially in the building and partially of equipment. Details of the struck situation are continuously being confirmed. Electricity, water and the gas infrastructure is out of service now, and we will inform you of the prospect of restoration as soon as it confirmed.

2) Kanazawa Murata Manufacturing Co., Ltd. Sendai Plant

Address                       2-6, Akedori 3-chome, Izumi-ku, Sendai-shi, Miyagi 981-3206 Japan

Products                    Piezoelectric Products and SAW filters

Damage situation         There is no personal suffering. There is no big damage to the building and equipment. Electricity, water and the gas infrastructure is out of service now, and we will inform you of the prospect of restoration as soon as it confirmed.

3) Murata Manufacturing Co., Ltd. Oyama Plant

Address                       1-480, Inuzuka, Oyama-shi, Tochigi 323-8678 Japan

Products                    Polymer Capacitors

Damage situation         There is no personal suffering. There is no big damage to the building and equipment. Electricity is supplied, and we expect that operation can be restarted in a few days.

NIC

NIC Components Corp. does not have component production sites in the North Eastern region of Japan, so (at this time) we do not expect any adverse impact on component production.

Because of the nature of the earthquake and tsunami it is unclear at this time what the impact will be on the logistics of moving products from Japan but we are hoping for a clearer picture to develop over the next 48 to 72 hours. These we will communicate to you as the information is confirmed.

Nichicon

About the Tohoku Kanto earthquake and its impact on Nichicon (The 2nd report)

We inform that NICHICON (IWATE) CORPORATION has been completely inspected and is able to be operated but in taking consideration of all the efforts to restore the society life in the general area of the disaster, we decided that NICHICON (IWATE) CORPORATION will resume operation from March 22nd, 2011.

■ Nichicon has one plant in the general area of the disaster which is located in Iwate Prefecture.

■ There are no personnel affected at this site and all the production equipment at NICHICON (IWATE) CORPORATION (Iwate prefecture) have been completely inspected and will resume operation from today.

■ Regarding all our other Nichicon factories in Japan we can inform that there is no damage affecting the plant operations in our domestic group companies as of 10:00am on March 14, 2011.

Panasonic 

14/03/2011 - Please note that the earthquake in Japan will have a direct impact for all airfreight dispatches from Japan.  Narita Airport has been shut down, as a result a big part of the airfreight consolidation which was planned to be loaded on this afternoon flights will stay in Japan. 
NEC informed us that all airlines are planning recovery flights once the airport is re-opened but no further detailed information is available at this moment. Congestion in cargo dispatch is expected. As for sea freight due to the closure of all Japanese ports we expect a delay in our consolidated FCL dispatch which was supposed to leave at this weekend. More detailed information will be provided beg next week.

Rubycon

There are not serious damages seen at Akita Rubycon, Fukushima Rubycon,Tohoku sales office and Mito sales office.

1. All Rubycon members and their families are confirmed being safe.

2. It is informed that there are some electricity problem and damages at Akita plant and

Fukushima plant. However, we are now in process of examining every production facilities and machineries to resume shortly.

3. It is also informed that there is some transportation difficulties occurred for some direction but we have not sufficient information available yet.

Sanyo

The head office of Sanyo is based in Osaka and the factories are based in Western Japan. All shipments come from Osaka airport which remains open.

It’s possible that communication by email with Sanyo will be suspended momentarily because their server is based in the eastern part of Japan, so there is the possibility of lack of electric power caused by the earthquake.

We have no alert messages from Sanyo concerning delays.

 

 

Electronic Component Counterfeiters Profit Off of Japan's Crisis

[Picture credit soltecblog.com]

Check out this article, "As Shortages Loom, Watch Out For Counterfeiters," by Dawn Gluskin.  She makes great points about how essentially all electronic manufacturers are going to be impacted by the earthquake and tsunami in Japan, and how that opens a wide door for counterfeiters to try to squeeze in and profit.

Also of note within her article some of the updates given for specific manufacturers:

• Silicon wafer fabs Shin-Etsu Chemical Co. Ltd. and Sumitomo Mitsubishi Silicon Corp. (SUMCO) have sustained damage to their production lines, and the power outage has forced production to come to a stop. The traffic for areas east of Kantô has also been affected. As a result, the supply for silicon wafer will drop significantly, which will cause the global semiconductor players outside of Japan to compete for material.


• Texas Instruments Inc. (NYSE: TXN)'s manufacturing plant in Miho, Japan, which is responsible for 10 percent of TI’s outputs, has been significantly damaged, affecting completed products and work in progress. It will likely take until September to get these plants operating at full production as normal. This will likely cause pushed-out lead times for TI products, especially DLP and Analog.


• Maxim Integrated Products Inc. (Nasdaq: MXIM)'s partner plant in Sakata (Seiko Emerson) has been affected by the power outages, and Maxim is currently in the process of shifting production to another facility.


• Samsung Electronics Co. Ltd. (Korea: SEC) and Hynix Semiconductor Inc. have stopped providing spot pricing for now as they wait to assess the current situation.


• Renesas Electronics Corp. (Tokyo: 6723) has temporarily shut down production at 7 out of 22 plants.


• DRAM production has been significantly affected, especially for PC and system manufacturers.


• Hitachi Ltd. (NYSE: HIT; Paris: PHA) and Panasonic Corp. (NYSE: PC) LCD fabs have both been affected, at least temporarily


• Toshiba Corp. (Tokyo: 6502)'s assembly line, near Tokyo, will be closed for at least one month. Mobile phone industry and auto industry for car navigation displays will be most affected.


• Murata Manufacturing Co. Ltd. has announced that three of its facilities have been affected by the earthquake. Affected product lines include: EMI Supression Filters, Coils, Piozelectric Products, Saw Filters, and Polymer capacitors. Murata has not yet released an estimated timeline on the restoration process; it's expected there will be at least some halt to production in the short term.


• NAND Flash produced in Japan accounts for nearly 40 percent of the entire global supply, and experts predict that shortages are imminent.

Her coverage of this topic makes Dawn Gluskin one to watch.

The Circle Widens as Japan’s Disaster Impacts NAND and DRAM

The Circle Widens as Japan’s Disaster Impacts NAND and DRAM

As promised, we’re keeping up on the impact of Japan’s earthquake and tsunami on the electronic component landscape.

According to Peter Clarke from www.eetimes.com, “The spot price for NAND flash memories jumped by up to 20 percent on Monday (March 14) on fears that supplies could be limited in the aftermath of the earthquake that struck northern Japan on Friday (March 11).”   [Click here to read the article in its entirety].

As said in the Reuters article “Chip Prices Jump as Japan Quake Threatens Supply”

If the supply chain is broken for even a few weeks, the impact could be felt in higher prices or shortages of gadgets such as Apple Inc's iPad and other tablets, smartphones and computers for months to come… NAND flash memory chips used in the fast-growing mobile devices market, dynamic random access memory (DRAM), microcontrollers, standard logic, liquid-crystal display (LCD) panels, and LCD parts and materials could all be hit, it said.

Spot prices of NAND flash chips extended gains on Tuesday, rising nearly 3% after a 20% jump on Monday, while DRAM memory chip prices gained 0.2% on top of a 7% rise on Monday, according to price tracker DRAMeXchange.”

So NAND flash memory and DRAM memory chips are on their way to a shortage situation.  We’ll see what’s next.