Read ControlTek's Response to Current Issues Facing U.S. Electronics Manufacturing
To Our Valued Customers
Over the last year, we have seen the rise of two very distinct but intersecting challenges affecting the U.S. EMS industry.
Challenge #1: Electronic Component Shortages
As early as last summer, growing demand for electronic components began sowing the seeds of what has become a fully fledged global component shortage. This worldwide shortage now threatens to reach well into 2019 and possibly as far as 2020. The result is that normally readily available parts have become much harder to source, as suppliers struggle to meet the demands of a shifting marketplace. Today we are seeing these shortages extend 90 day lead times out as far as 12 months.
Challenge #2: U.S. Tariffs on China
Adding to this challenge are the recent U.S. tariffs imposed on many common electronic components sourced from China and used in electronic products manufactured in the U.S. These tariffs currently hover as high as 25% for some - though not all - commonly used materials like Op Amps, Capacitors, and Resistors just to name a few. Today we are seeing a greater level of variability and complexity in component pricing as key suppliers react to these new regulatory changes.
Though these are uncertain times for our industry, we remain committed to providing as much certainty as we can for our valued customers so you can in turn provide the same for your customers. Our goals in addressing these challenges are simple: avoid any “line down” situations and do our best to maintain the smallest possible pricing impacts by remaining diligent in our efforts to counteract these challenges. We believe it is through partnership and collaboration across the supply chain and with our customers that we’ll be able to meet these goals.
Trends We are Seeing
Electronics distributors are feeling the tariff impact first, and many are responding with aggressive pricing policies. Some have gone as far as adding a straight 23% to their top line pricing. We feel these tactics are overly aggressive and are taking the necessary steps to avoid working with these distributors.
Interest in identifying alternate, equivalent components that are available is also on the rise, as we seek out more readily available components. This effort may include reviewing and qualifying a ‘drop-in’ replacement, or substantial work to re-layout a PCB to accept the identified alternate component. Since we service both aerospace and medical clients, this effort includes a full risk analysis and design verification.
Possible Solutions
Supply chain efficiency is our best weapon in the fight against market volatility. If your team has the bandwidth, partnering with ControlTek to find alternatives and keep the lines of communication open to avoid delays is our recommended best course of action. You can also hire our design engineering team to conduct a BOM review or make design changes that may remediate or even eliminate long lead times altogether.
As always, we will continue to monitor these ongoing market challenges even as we take the steps we believe will allow us to lessen their potential impact for our customers. If you have any questions about component shortages or U.S. tariffs, we urge you to contact ControlTek today for assistance.
