Most companies that purchase electronic components are find that shortages are becoming more and more common, just as more industry sectors become reliant on those components. Here’s why.

First, of course, the world wide dislocation caused by covid. Some of the countries that produce the most parts, especially in the Far East, also had the strictest lock-downs, which halted production. Once the initial spread of COVID was contained and it’s effect managed it took time for the manufacturers to get back to full capacity. At the same time, all their customers were also getting back to full capacity, resulting in the well-publicised chip shortages hitting the car industry and many others.

Second, the long-term effects of this. Many big manufacturers are now consistently ordering more parts than they need immediately, to cushion themselves from future shortages. This just pushes the shortage down the line, to smaller companies with less purchasing power.

Third, industry consolidation. Electronics is a dynamic industry that always sees a lot of takeovers and mergers. The financial problems caused by COVID increased this. After every merger or takeover the combined product lines are merged, too, and some products made obsolete even if they are currently profitable. Where 2 products which are very similar, so that they compete against each other, one will be made obsolete. Components which do not fit with the new company’s new strategy will also be made obsolete.

Fourth, consumer demand for new products. The favourite customer of the big consumer electronic companies like Apple and Samsung is the early adopter who is willing to pay a price premium to be at the bleeding edge of technology, and is willing to replace their current device with a newer one even if the current device does everything they need. These customers expect regular releases of new models. New models create component shortages in two ways. First, the manufacturer will buy up a large proportion of the total output of a part needed in the new model. Second, launching new model means an old model is discontinued, and the parts manufacturers might decide it is no longer profitable to produce the components it used.