The demand and supply of Electronic components has been volatile since the first vacuum tube valve was shipped, and that’s not going to change in 2025. Some of the challenges in the recent past have been completely unforeseen, like the supply chain disruption caused by the COVID pandemic: perhaps something unexpected will occur again this year. There are some challenges that can be foreseen. Here they are.
Politics and trade policies
The return of Donald Trump to the Us presidency marks a shift towards protectionism, tariffs and trade restrictions, particularly concerning China. This could damage the global economy. On a smaller scale, manufacturers finding they can no longer export to China might find they need to offload their stock quickly and cheaply to other markets.
AI in the supply chain
Artificial Intelligence (AI) is transforming supply chain management by improving decision-making, streamlining logistics, and making demand forecasting more accurate. More companies are adopting AI to stay competitive, work more efficiently, and adapt quickly to market changes.
The supply chain for AI
IN 2024 AI generated an insatiable demand for suitable processors. There are 2 possible reasons why this might not continue in 2025. First, although AI is becoming ubiquitous, it is not becoming profitable. Most AI companies are losing money. ChatGPT creator OpenAI is haemorrhaging massive amounts of cash and shows no signs of making up for it in increased revenue. At some point investors will lose faith, and a repeat of the Dot Com boom and bust cycle becomes possible.
Second, chips are becoming more efficient. Nvidia has unveiled its latest chip which it says can do some tasks 30 times faster than its predecessor. That means one new chip replaces 30 old ones.
Obsolescence happens more quickly
We explained in an earlier blog why electronic components become obsolete. The increasing rate of change in processor technology means that electronic components have increasingly short life cycles, and will become obsolete more quickly. The rate of change will increase again when the use of AI in chip design, manufacturing and testing becomes ubiquitous. Companies must continuously update their product designs to stay competitive, which can lead to increased costs and inefficiencies.
Geographic single points of failure
We have written before about how semiconductor manufacturing is centred in a few companies in a few countries. This means a geographical or political event impacting those geographic areas may have a devastating effect on the worldwide supply of components.
Change is the only constant
For us at Auckland this set of challenges is not, in fact, that challenging. Change is the only constant in our market, and we have been successfully managing that for more than thirty years. We are confident that whatever happens in 2025 we will continue to solve your component sourcing problems.