The Most Destructive Risks in the Electronics Supply Chain Right Now

Article Highlights:

• To compile a list of the “most destructive” risks in this sector right now, we used the formula favored by the traditional risk matrix: probability plus severity. In other words, the threats that made this list have either a high probability of impacting electronics manufacturers, are likely to inflict a severe impact if they do occur, or both. 
• The scarcity of memory chips, and the sky-high prices that are stemming from the shallow supply, are arguably the most significant risk businesses operating in the electronics supply chain are confronting right now. 
• While critical minerals aren’t facing shortages as severe and impactful as those shaping the memory chip market, limited supplies of specific minerals are still reverberating in meaningful ways. This is especially true for rare earth elements (REEs), a family of 17 critical minerals that includes scandium, yttrium, and dysprosium—materials that are critical to product formulations in industries like aerospace, defense, and semiconductor manufacturing.

Last year was a tumultuous one for global supply chains. The Trump administration implemented a sweeping tariff regime that left few nations untouched, China continued to flex its leveraging muscle over critical minerals and rare earth elements, and the U.S. resurrected industrial policies not seen in generations. As we move into the second quarter of 2026 and beyond, it’s clear that the picture of supply chain turbulence is beginning to evolve. While tariffs and other trade restrictions continue to make their presence felt among importers and manufacturers, new threats are also emerging on the horizon. 

This is especially true for electronics manufacturing, where the global supply chain has been affected by everything from geopolitical tensions to trade restrictions to supply volatility. To compile a list of the “most destructive” risks in this sector right now, we used the formula favored by the traditional risk matrix: probability plus severity. In other words, the threats that made this list have either a high probability of impacting electronics manufacturers, are likely to inflict a severe impact if they do occur, or both. 

These are the hazards automakers, semiconductor manufacturers, smartphone firms, and other businesses that source from the electronics supply chain should be concerned about right now. 

The Memory Chip Shortage

By now, everyone with any connection to electronic components or the high-tech supply chain is aware of the scarcity of memory chips. The story is, by now, quite familiar: As AI companies emerged over the past several years, they began to drive immense demand for DRAM, NAND, and high-bandwidth memory (HBM), a specialized dynamic random-access memory that utilizes the high data transfer rates that enable AI models to process enormous datasets. Over time, these new, voracious players in the semiconductor space spurred memory manufacturers like Micron, Samsung, and SK Hynix to start allocating more of their production capacity to HBM. 

By the middle of 2025, these manufacturing decisions started to throw the supply and demand dynamics for traditional memory commodities out of whack. While demand for DRAM and NAND remained as potent as ever, the supply was tightening due to the prioritization of HBM by the world’s foremost memory chipmakers. As a result, prices started steadily climbing. In the fourth quarter of 2025, some estimates suggested that prices for memory products surged by as much as 30%. 

Unfortunately, that was only the beginning. The most extreme price increases are likely to occur in 2026: market research firms like Counterpoint are already pointing to massive price jumps of up to 90% in the first quarter of 2026, when compared to the last quarter of 2025. DRAM, NAND, and HBM are all hitting—and then promptly surpassing—all-time price highs. 

The scarcity of memory chips, and the sky-high prices that are stemming from the shallow supply, are arguably the most significant risk businesses operating in the electronics supply chain are confronting right now. While manufacturers are adopting a wide range of strategies to manage these unprecedented cost pressures, some of the most high-profile efforts include:

• Reducing the total memory in consumer electronics products
• Raising prices 
• Prioritizing high-end products, where price increases may not be as noticeable
• Cutting down on production 

The Iran Conflict and the Strait of Hormuz 

Shortly after the U.S. and Israel launched a joint attack on Iran in the early morning hours of February 28, the besieged nation tightened its grip on the Strait of Hormuz, a major maritime shipping lane that connects the Persian Gulf to the Gulf of Oman and the Arabian Sea. On Monday, March 2, The Iran Revolutionary Guard announced that the strait was closed, and that any vessel attempting passage would be targeted by the nation’s army. Global industry responded quickly: by Wednesday, March 4, traffic passing through the Strait of Hormuz had plummeted by around 90%, with satellite images showing tankers clustered together on either side of the narrow route.

The Strait of Hormuz is a crucial route for the global energy industry: in 2025, around 13 million barrels of oil passed through the strait every single day, or nearly a third of all seaborne crude oil. As a result, any prolonged closure to this shipping channel could trigger shockwaves across the energy sector, potentially sending oil prices surging. While the impact on other sectors may not be as direct, semiconductor manufacturers and other energy-intensive industries are heavily reliant on the crude they import from the Middle East. 

Further, it’s clear that a lasting blockade would negatively affect the auto manufacturing industry, which relies on crude as a raw material for synthetic rubber and plastic parts. Sustained increases in oil prices could potentially raise the costs of raw materials for automakers by up to 25%. Further, Chinese car manufacturers have grown their market share in nations like Iran, Saudi Arabia, and the United Arab Emirates (UAE); the strait’s closure could force them to reroute shipment through the Cape of Good Hope, ramping up costs and stretching out delivery times. 

It’s also worth remembering that we remain in the earliest stages of this maritime blockade. If it persists, it’s highly likely that a wide range of other manufacturers, raw material producers, and other businesses will eventually feel its impact. 

Critical Mineral Vulnerabilities

While critical minerals aren’t facing shortages as severe and impactful as those shaping the memory chip market, limited supplies of specific minerals are still reverberating in meaningful ways. Though U.S. President Trump and his Chinese counterpart, Xi Jinping, met in October 2025 and achieved what appeared to be a modest diplomatic breakthrough, U.S. companies are still struggling to source critical materials from China. 

This is especially true for rare earth elements (REEs), a family of 17 critical minerals that includes scandium, yttrium, and dysprosium—materials that are critical to product formulations in industries like aerospace, defense, and semiconductor manufacturing. These REEs are becoming scarce enough that some tier one and sub-tier suppliers are now being forced to turn away smaller customers in order to prioritize larger clients in the aerospace and chip manufacturing sectors. 

The diminishing supply of these essential raw materials can be traced back to the export restrictions China implemented in April 2025. Though China claimed that it would suspend its export restrictions following the detente between Trump and Xi in October, the statistical reality is that substantially less REEs are now being shipped from China to the U.S. In the eight months prior to the export controls China imposed in April, the country exported over 330 tons of yttrium products to the U.S. In the eight months since, that figure has dwindled to a shockingly low 17 tons—a dropoff of around 95%. 

While the throttled supply flow of these REEs have yet to sweep across the aforementioned manufacturing sectors in a major way, suppliers are feeling growing pressure to start making strategic decisions based on their limited supplies. 

While the throttled supply flow of these REEs have yet to sweep across the aforementioned manufacturing sectors in a major way, suppliers are feeling growing pressure to start making strategic decisions based on their limited supplies. 

Tariff Volatility 

It may come as a surprise that this isn’t the number one risk for companies operating in the electronics supply chain. And the truth is that, depending on how things develop over the next few months, tariffs could easily re-emerge as the preeminent hazard in global manufacturing. As of March 2026, the U.S. Supreme Court has overturned the sweeping tariff regime Trump implemented under the International Emergency Economic Powers Act (IEEPA), which includes the country-specific “reciprocal tariffs” that dominated headlines in 2025. 

So where does that leave U.S. importers? Trump responded to the Supreme Court’s decision by quickly invoking Section 122 of the Trade Act to impose a 10% global tariff. Shortly thereafter, he declared that he would raise the rate to 15%. While the increase did not go into effect immediately, Treasury Secretary Scott Bessent said recently that the White House was hoping the new rate would enter into force within the first full week of March. 

For original equipment manufacturers (OEMs) and other U.S. businesses that source from the global electronics supply chain, the chief source of risk associated with President Trump’s tariffs is the uncertainty. While the Supreme Court may have struck down reciprocal tariffs for the time being, administration officials seemed confident that they would be able to find new ways to resuscitate the import levies in the months to come. Shortly after the court decision was announced, Bessent himself declared that he expected tariffs to “be back to their old rate within five months.” 

This all adds up to a strategic quagmire for businesses, who must make critical sourcing decisions with a profound lack of visibility into the medium and even short-term future. 

For original equipment manufacturers (OEMs) and other U.S. businesses that source from the global electronics supply chain, the chief source of risk associated with President Trump’s tariffs is the uncertainty.

Navigate High-Impact Risks With Data and Expertise

Between an escalating memory chip shortage, looming threats to critical mineral supplies, and an unpredictable trade landscape, businesses that rely on the electronics supply chain may be struggling to find their equilibrium. But instead of hoping for an unlikely return to stability and normalcy, OEMs and other organizations need to embrace a proactive approach to managing mercurial supply chains. 

Supply chain risk management platform Z2 helps companies identify, assess, and mitigate supply chain risks of all stripes. Z2’s Risk Hub provides detailed risk assessments for suppliers, sites, and parts, offering compatibility with a wide variety of different risk frameworks. The SCRM software provides both custom and out-of-the-box risk evaluations, giving users immediate access to risk scoring on over 700,000 suppliers and 150,000 sites worldwide. Using Z2 and its Risk Hub, organizations are able to:

• Vet Prospective and Current Suppliers: Z2 can function as a primary resource for businesses that want to assess new potential suppliers and re-assess companies they’ve worked with for years. Risk evaluations include individual scorecards for Sanctions, Geopolitical Risk, ESG, Financial, and Data Transparency, and users can delve into the risk categories to understand all the variables.

• See Into Risky Sub-Tier Manufacturers: Sub-tier suppliers have a notorious lack of transparency, a major stumbling block for businesses that want to increase visibility and maximize their understanding of supply chain risks. Z2’s Risk Hub sheds light on tier 2 and tier 3 suppliers, giving organizations an essential window into the hazards sub-tier entities may be secretly carrying. 

• Centralize All Risk Intelligence: In a data landscape increasingly fragmented across files, spreadsheets, and systems, Z2 consolidates data and intelligence in a single intuitive platform. With Z2’s Risk Hub, engineering, procurement, and strategic sourcing can all draw on the same single source of truth, facilitating more effective dialogue, strategizing, and mitigating actions. 

To learn more about Z2 and how it can help companies identify, assess, and strategically solve for their unique supply chain risks, schedule a free trial with one of our product experts.