Supply chain issues a top concern across most industry sectors

Issues around supply chain, often driven by semiconductor shortages, remain the top concern for most industry sectors despite talks of the pandemic slowing down, according to a report from electronic components and semiconductor distributor, Avnet Silica.

The report, which is based on a study conducted by Avnet consultants after reviewing 30,111 earnings call across different sectors between January 2018 and April 2022, points out that supply chain issues occupied more than 60% of airtime in earnings calls across all industries in 2022, compared to just 47% and 37% in 2021 and 2020 respectively.

The bulk of supply chain issues can be attributed to shortages of semiconductors, as their demand continues to grow, outstripping supply. This is in contrast to the popular belief that lockdowns initiated due to the pandemic was responsible for such issues.

“It (the pandemic) certainly added a lot of pressure to the system, with ports and factories closing during lockdown. However, if it was really all down to the pandemic and lockdowns, companies would have largely recovered by now. But that is not the case,” said Mat Ransom, director of supply chain programs at Avnet EMEA.

“There are more and more electronic components going into so many of our products these days, from our clothes to our cars. And the rate at which consumer demand grows is not as easily matched by growth in production of electronic components like semiconductors and microcontrollers,” Ransom said.

Chip makers slow to ramp up capacity

The reason for demand outstripping supply, according to Ransom, is the relatively low rate of annual capital investment in semiconductor production, which puts brakes on the ability to expand capacity. The approximate value of investment is around 15% of demand over the next four years across major chip manufacturers, the report shows.

“It can be a slow process to ramp up production and supply of these essential components. There are several new semiconductor factories planned to come online in the next five to six years, but in the meantime, demand continues to grow,” Ransom said.

A separate report from market research firm International Data Corporation (IDC) expects tight semiconductor supply to continue through the first half of 2022 as the industry builds up inventory to normal levels. 

The 20 industries included in the Avnet Silica report include consumer electronics, automotive, aerospace and defence, telecom, fashion, retail, conglomerate, beverages and farming.

The report also says that as semiconductor shortages continued to grow, supply chain issues were brought up on 100% of earnings calls in 12 different sectors this year, including automotive, electronic components, computer hardware and consumer tech. Other factors heavily plaguing enterprises across these sectors include inflation and issues around talent.

Supply Chain, Technology Industry