Doom, gloom, weather, war, and pandemics. Supply chain instability is the new norm. However, it’s important to recognize signs that not all is terrible, hopeless, or unpredictable. Here are five supply chain bits of better news. Of course, you might have to read it fast…things could change.
#1 Electronic Components Find Stability
Although we may not see it for over a few months, the chip industry is beginning to exhibit some balance. After far too long, outrageous lead times in the semiconductor supply chain are beginning to ease. According to a recent DIGITIMES Asia article, IC design houses see short lead time orders for mass-market devices, TVs, IT products, and handsets are witnessing a surge in short lead times. Fabless chip makers in Taiwan are beginning to see signs of recovery and signs that inventory depletion is finally bottoming out.
#2 When Demand is Up, Wear It
Although consumer demand has not improved across the proverbial board, some segments, including wearables, show signs of recovery. Watches, health monitors, and other device shipments are beginning to rebound based on upticks in consumer spending in 2023.
Third quarter, 2023, will be the time for a turnaround as excess chip inventory in several segments resolves.
#3 The Alternative Technology Grab
If you can’t get what you want – use something else. Case in point—Tesla replacing SiC chips with 10x faster GaN. Given their speed, efficiency and reliability, gallium nitride alternative semiconductors are rapidly gaining traction. Tesla is reducing SiC use by approximately 75% for EV powertrain systems based explicitly on gains in energy efficiency contributing to driving range increases. GaN semiconductors operate 20 times faster than silicon, making it possible to triple power and charging speed for half the size and weight of a GaN chip.
Not only are the chips being snapped up, but so are the companies supplying them. Infineon acquired GaN Systems, and Microchip is leveraging capabilities gained from its acquisition of Iconic RF, maker of GaN and gallium arsenide MMICs used in aerospace/defense applications like electronic warfare, satellite communications, commercial and defense radar systems, and test equipment. It’ll be interesting to see who’s acquired next.
#4 Material Lead Times
The word in the industry is that the overall trend in most segments is improvement in materials lead times. Also significant is, volatility is down, enabling better planning in the short term.
The good news for the supply chain is that they remain less volatile while lead times remain extended. Lower volatility with lead times allows us to plan our inventory and serve our customers more effectively.
In its simplest terms, supply chain management is all activities that go into sourcing, producing, and delivering goods. The exact details will depend on the industry. For example, manufacturing supply chains focus on sourcing raw materials to deliver the finished products.
#5 AI’s Positive Impact on Supply Chains
The value of AI is coming to the fore across many industries. In the supply-chain realm, it’s being used to load transportation vessels, customer service, demand forecasting more accurately, route optimization, warehouse automation, inventory management, and support supply chain management activities across the board. An important aspect of AI plus the race to automate is that the two can develop simultaneously. While this might add confusion initially—the long-term benefits are obvious.
So far, AI is impacting supply chains by increasing the speed and accuracy of logistical systems so that potential shortages are identified, robots can be more intelligent, and transportation can be targeted. AI provides greater visibility into what is going on across the whole supply chain, and as it gains in capabilities, its impact will expand rapidly.
Despite the challenges of pandemics, weather events, and geopolitical issues, there are some positive signs of stability in the supply chain industry. The electronic components industry shows signs of balance, wearables rebound, and gallium nitride semiconductors are gaining traction. Materials lead times and volatility are improving, leading to better planning and inventory management. Finally, AI is positively impacting supply chain management by increasing the speed and accuracy of logistical systems. While the supply chain industry remains dynamic and unpredictable, these positive signs indicate possible stability. Companies should remain vigilant, adapt to changes quickly, and leverage the latest technologies to thrive in these challenging times.
