With all the current focus on the looming Brexit deal-no-deal situation, it’s easy to forget that during 2018, the world was facing a trade crisis in the form of the growing tensions between China and the US. The outcome of this made 2018 a tough year for global electronic component supply chains. The two economic titans continued an ongoing tit-for-tat trade war, which put the technology community and all associated industries in an extremely volatile position.
2019 is still young, but tensions do seem to be easing with trade talks between the US and China underway to negotiate a deal to avoid further escalation. This week President Donald Trump stated that a new trade agreement was ‘very, very close’ ahead of the threatened increase on import duties for Chinese goods (due in on 1st March) – a positive sign that pressures on global trade could now ease.
How are global electronic suppliers affected?
Large and small electronics companies have been affected by the trade war. Apple’s recent woes are the most prominent as Apple’s CEO, Tim Cook, sent a letter to investors announcing a downgrading of profits for the last quarter of 2018. This was the first time Apple has ended a year with less quarterly revenue than they started with. Cook blamed Apple’s average performance on the rising tension between the US and China. This news caused a 10% drop in the technology firm’s share price, sending out shock-waves to its supply chain.
This demonstrates how supply chains in today’s world economy reach way beyond borders and are intrinsically woven around a global collaboration outside individual government control impacting large and small organisations.
What are companies doing in response to volatility?
The impact on the electronics supply chain has been a wakeup call to technology companies on the vulnerability of manufacturing in China. 2019 will be the year of adaptation and change to the economic and political climate as the trade talks continue. One thing is clear though, reliance on one company or country for components is no longer viable and there is an increasing move towards balancing price with availability and on time supply.
What can CEMs do?
In the short term, a close eye on the impending trade negotiations between the US-China is a must for all UK CEMs. 2018 has been a year of ups-and-downs, and there is a degree of uncertainty on the outcome of any new trade deal. If the deal is favourable to China, it may stem the flow of technology companies moving away from China based CEMs. However, if China’s market demand for foreign technology continues to decline, then we may see the continuation of tech companies moving to other manufacturing nations such as India, Vietnam, Mexico, or Taiwan.
FermionX and supply chain management
For FermionX, supply chain issues such as passive components availability have been the challenge for 2018. Alongside the trade issues between China and the US, the growth of IoT and electric vehicles has resulted in an explosion of new products, all demanding electronic components.
FermionX made the decision to move towards non-franchised distributors, approved and certified to ISO 9001. This gives us the flexibility to look globally for supplier options and as a result, has given us a wider range of stock availability whilst maintaining our quality standards in product and service. We are happy to share our list of approved suppliers, just contact us for more information.
We offer customers ordering options such as 12 – 18 month schedules. These can be planned and parts ordered with FermionX holding stock to ensure no delay in components. The purchase of volume components gives continuity of pricing and delivery. This approach allows us to manage costs more effectively, for us and our customers.
The key to managing the variances in the supply chain for FermionX has always been based around relationships (customer and supplier) and flexibility. Taking the time to understand the customer’s business cycles, introducing working practices such as shipped line arrangements, stock holding and obsolescence planning, along with regular communication all help to manage the inevitable fluctuations in component supply.