Price Hikes and Shortages: Production Uncertainty for Electronic Parts in 2021
- Electronic component prices steadily increasing since November of 2020
- Production uncertainty from 2020 carries over to the new year
- Industry experts expect shortages in 2021—with semiconductors as the most recent example
Increased Electronic Component Prices
Three of the primary drivers of increased component prices in 2021 are as follows:
- Rising prices for copper and other manufacturing metals
- Potential shortages of semiconductors, multilayer ceramic capacitors, power MOSFETs, and more
TrendForce—a market research firm—expects 20% price increases for solid-state drive controller chips. This rise in pricing is a result of the inability to meet SSD market demands and the shortage of supply in the foundry market.
DRAM is also expected to see increased prices, as a 5% increase in pricing is expected in the first quarter of 2021. Additionally, PMIC prices saw a 20% price increase at the onset of the new year.
Rising prices in copper and other metal materials have created an increase in pricing for electromechanical devices and passive components.
Overall, memory and system chips are projected to see the biggest increases in pricing for 2021.
On June 1st, 2021 STMicroelectronics has announced a price increase due to the ongoing semiconductor shortage. In a letter to its customers, the company stated many of its material suppliers cannot meet demand, resulting in more aggressive commercial terms and price increases in order to obtain necessary materials. Prices will be increased across all of STMicroelectronics' products.
NOR flash prices are also expected to soar in 3Q21. Prices could increase by as much as 30% due to a tightened supply of memory chips. 3Q projections estimate the supply of NOR flash devices will fall 10% short of demand. In addition to the 30% increase in pricing expected in 3Q, 2Q prices have already seen a 50-60% rise--according to DigiTimes Asia.
The tightening supply and price increases for NOR flash components can be attributed to the following:
- Demand for next-gen smartphones using AMOLED displays
- Large orders of true wireless stereo earbuds and headphones
- Demand for 5G base stations
- Various related device applications
Production Uncertainty Continues in 2021
The pandemic remains the primary concern for supply chain managers and procurement specialists. The U.S. and many other countries saw record case levels, even though vaccines are gradually being administered.
The current rise in case levels creates continued concern among industry experts that COVID will continue its impact on supply chains. The impact of COVID in 2021 remains difficult to predict because of the fluid nature of the pandemic. Increasing supply chain visibility and communication are two ways companies can combat the pandemic's disruptive effect.
The pandemic has also created another unforeseen effect on supply chains. Having to spend more time at home, consumers increased their electronics purchases—from smartphones and laptops to TVs and gaming systems. This increase in consumer electronics demand has placed automakers further down the totem pole.
Many automakers have had no choice but to cut their manufacturing capacity.
Component Shortages Expected
The increased demand for consumer gadgets created an unforeseen spike in production demand that large foundries and chip assemblers could not keep up with. This bottlenecked production not only for cars but for entertainment devices like the PlayStation and Xbox.
The semiconductor supply chain was further constrained in December due to Trump's move to blacklist a large semiconductor manufacturer in China.
And it isn't as simple as boosting the semiconductor supply. It takes many years and piles of money to build fabrication plants. Chipmakers prefer a more conservative approach to silicon fabrication due to the risks of extreme financial loss.
Automotive manufacturers are not the only industry set to be affected by the semiconductor shortage in 2021. As consumer electronics continue to attract the attention of silicon fab sites, shortages in other industries can only be expected.