Several weeks ago, we offered some key insights into how the recent semiconductor shortage was impacting lead times for supply chains across the boards. The good news is that we’re now equipped with additional information to provide updated predictions. The bad news, unfortunately, is that the lead times haven’t gotten any better. In fact, they’ve gotten worse. Here’s everything you need to know to try and maintain a competitive advantage.
In the last seven months, since the beginning of Q1 and as we enter into Q3, the average lead times for some of the semiconductors we’ve been tracking have roughly doubled.
As a result, some semiconductor suppliers are now asking customers for 18-month non-cancelable / non-returnable purchase orders to assure supply. These requests, while unprecedented, are connected to the race for assuring long-term semiconductor availability. Various news reports confirm this fact, stating that semiconductor companies are locking in foundry capacity with longer term commitments than ever before to ensure they get their "fair share" of future supply. In one example, Digitimes reported, “UMC has plans to invest vast sums to expand a 12-inch fab site in southern Taiwan, and eight of the foundry's major clients have already reserved parts of the additional capacity for a six-year period.”
As we already know, the lead-time increases were driven by a number of exogenous factors, exacerbated or even driven by the COVID-19 pandemic. And with further unplanned shutdowns in various regions likely to continue impacting supply, reversals of these lead-time increases are unlikely anytime soon. And with recent news reports stating that Apple is increasing their production of the iPhone by up to 20% from the prior year, we can expect further strain on the current IC supply through the remainder of 2021.
Maintaining a Competitive Advantage
As we’ve previously mentioned, there are two key requirements you need to satisfy to stay ahead of the game and protect your supply chain. The first is accessing and utilizing reliable, up-to-date analytics on lead time averages and insights. The second is investing in a reputable, always-on risk navigation platform. LevaData’s Supply Risk Navigator software does just that, offering companies the visibility and recommendations needed to safeguard their supply chains and maintain agility. Connect with us today to learn more about our revolutionary, AI-driven platform and what we can do to help you manage these risks and more.
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