How Companies Are Overhauling Supply Chains To Ease Bottlenecks In PCB Assembly industries?
Recently, I saw a Wall Street Journal video news it is about how companies are overhauling supply chains to Ease Bottlenecks. The Covid pandemic has strained global supply chains, causing freight backlogs that have driven up costs. Now, some companies are looking for longer-term solutions to prepare for future supply-chain crises, even if those strategies come at a high cost. The main causes:
The first to bear the brunt, of course, is the COVID19. Global economic activity has slowed since the outbreak of COVID 19, in 2021. The effects are found in the dramatic price rising of the components, In the PCBA industry, such as chips, terminals, resistors, and capacitors, the demand is greater than the production capacity, which causes huge pricing changing. What’s more due to such big changes, as mentioned our customers, most of their projects are hold, not sure when can be started again. Undoubtedly, this is a disaster for the world’s economic development. In addition, China’s domestic COVID 19 epidemic zero-tolerance prevention policy. Once a transmission is found, production activities may be stopped.
Similarly, the trade war between US and China has also greatly affected the rise in raw material prices. for the trade war, some people might say that this is the world’s two largest economies that have been locked in a bitter trade battle, nothing to do with me, cause I am not Chinese nor American. China has lowered the tariffs it applies on imports from the rest of the world. China’s average tariffs toward those exporters have declined from 8.0 percent in early 2018 to 6.5 percent by early 2022.
The United States increased its average tariffs on imports from the rest of the world from 2.2 percent to 3.0 percent over this same period. This somehow still causes a big increase in the price of raw materials and trading. To most the companies, even some start-up companies, it is a headache to control the cost. Just like the journalist said in the video, many companies are trying to solve the problem of rising costs by seeking new producers, while this is often ill-considered, because considering the cost of risk, trial and error, and when finally to the finished product, the total cost may be twice as high as that of the current supplier. This is a fact not an alarmist.
In addition, the war between Ukraine and Russia is also affecting the pattern of the world, including, of course, the increase in the production cost of finished products. Simply put, as we might know chip manufacturing requires a special gas – neon, 70% of the world’s gas comes from Ukraine, and 40% of the rare earth metal – palladium, needed for chip production, comes from Russia. During the war, the supply of this gas was unstable, which led to The chip production cycle and costs have been greatly increased. In May, the major chip manufacturing giants, such as Texas Instruments, Intel, Infineon, Micron, Analog devices, and Microchip, all have further deteriorated due to production capacity, raw materials, and other reasons for production cycle and finished products will increase again in May. Thus you can see, war is not only two countries’ business, but the whole world’s. Peace, not war, is good for our human beings.
As a result, not only for China’s PCBA manufacturing industry but also for the demand side of PCBA customers, they all slow down or seek more reflection to solve the current supply chain bottleneck. The good news is that, for Auspi, we have started our global branches since 2003, till now we have 4 manufacturing bases, and 8 service centers (4 manufacturing bases are among the 8 service centers). Our main production and manufacturing bases are in Shenzhen, with others in the Czech Republic, Mexico, Canada, and Russia. At the same time, we have local offices in Hong Kong, the United States, the United Kingdom, and Brazil. Such a strong global network gives us a great opportunity to provide ems solutions for PCB assembly customers to solve the bottleneck by solving the problems caused by trade wars, supply restrictions, rising freight, and other issues, but also help to manage a better supply chain solutions!