Lead Times and Supply: Electronics Manufacturing Update 2023

The fallout from the COVID-19 pandemic started a domino reaction across the electronics supply chain, made worse for UK manufacturers by the lingering impact of Brexit and the logistical and economic difficulties caused by the war in Ukraine. 

Still, many electronics companies have remained resilient. The demand for next-generation technology is increasing across a range of sectors, with Precedence Research’s report on consumer electronics predicting that the market would grow at a compound annual growth rate (CAGR) of 5.1% between 2022 and 2030.

However, with logistics issues still impacting the availability of key components, electronics manufacturing service (EMS) providers and original equipment manufacturers (OEMs) must consider how they can mitigate supply and pricing constraints to continue meeting this demand. 

So, we have analysed our suppliers’ lead times and the trends shaping component availability to understand the market outlook for 2023 — and beyond… 

Reasons for supply and demand issues

ICs and semiconductors have been particularly affected by extended lead times in recent years, presenting many obstacles to electronics design and development. Why? 

Passive and discrete passive components — resistors, capacitors, diodes and inductors — are integral to the design of ICs, semiconductors and PCBs. So, any disruption in the manufacture of these components will have a knock-on effect on supply availability, leading to product-on-allocation arrangements and delays across the board. 

According to our April 2023 report, consumer electronics such as smartphones and automotive electronics equipment are the biggest market drivers for passive component volumes.  

Manufacturers have so far managed to increase their capacities to meet these sectors’ demands by downsizing components and making performance improvements. As a result, standard small-case micro lead-frame chip carriers (MLCC) and chip resistors have remained available within regular lead times, making it possible to deliver the consumer electronics that surround us today. 

However, supply challenges still exist for many components due to the explosion of complex electronics in every application, driven by two macro trends: sustainable energy supply and the electrification of transportation. 

These applications require performance components with higher voltages and increased reliability. Typically, the production processes for these products involve more time and labour, meaning that yield volumes may be lower. Manufacturers are investing to meet demand, but in some cases, backlogs are over 18 months — creating even longer lead times. 

So, how is all of this impacting the availability of electronic components? 

Lead times for key electronics components

According to our recent observations, lead times are component and manufacturer-specific, and the situation is constantly changing. 

For example, despite disruption in ruthenium and alumina supply chains following the conflict in Eastern Europe, lead times for thick film chip resistors have declined steadily between mid-2022 and April 2023 due to lower consumer electronics demand from China. Still, the availability of high-power thick film parts remains tight due to increased demand from the electric vehicle (EV), infrastructure and defence sectors.  

The fluctuating availability of various passive components is also impacting PCB production. PCB manufacturers have faced inventory adjustments due to the changing cost of raw materials such as copper, foil, resins and glass fabrics. Additionally, the dampening demand for PC and consumer electronic devices has led to a deterioration of conventional materials suppliers’ businesses, further compounding supply issues. 

As a result, in Q1–Q3 2022, we found that the average PCB quotation lead time out of our system was over 20 weeks. However, towards the backend of Q4 2022, this figure dropped to 18–20 weeks, marking a slight improvement.   

Overall, the quote signs from Q1 2023 are positive. We are seeing progress on some lead times, with the average PCB quote time dropping to 14–18 weeks.  

There is a combination of factors in play that are contributing to these improvements. Perhaps most significantly, customers are becoming increasingly forward-thinking with their PCB designs, replacing conventional and hard-to-procure components with more available alternatives. This is evident with the amount of small-quantity prototypes we seem to be quoting to customers for PCB projects. 

Still, we are not quite back to normal conditions yet. So, EMS providers will need to take a cautious approach to remain resilient to changing market conditions. 

Electronics manufacturing market outlook

Whilst the current supply shortages will likely continue impacting operations for the foreseeable future, electronics manufacturers, supply chain managers and OEMs can still work together to mitigate any disruption they might cause.  

Planning ahead will be crucial throughout the rest of 2023 and beyond — especially considering the unpredictability of supply chains. Transit times from the Far East are stabilising, but delays are still to be expected. Therefore, forecasting, advanced procurement and vendor-managed inventory will all help streamline operations across the board. 

It will also be important to continue realistically quoting on demand and ensuring lead times are accurate to avoid over-promising on delivery. We would also encourage OEMs and other EMS customers to order well in advance to help manufacturing processes run smoothly. 

By staying organised, evaluating supply channels, reimagining electronics designs and seeking practical alternatives to more high-demand materials and components, we can continue producing innovative new products whilst managing expectations and keeping costs down where possible.