One of the world’s largest electronics contract manufacturers has warned that the global chip shortages that are disrupting the auto industry and threatening the supply of consumer technology products will continue for at least another year.
The outlook from Flex, the world’s third-largest manufacturer, is one of the bleakest yet for a crisis that is forcing car and consumer electronics groups to re-examine their global supply chains.
Fast Rebound in car sales Combined with a boom driven by the shutdown of game consoles, laptops, and TVs, the world’s chip makers have been left mired in a sharp increase in demand.
Singapore-based Flex has more than 100 locations in 30 countries and manufactures appliances and electronics for companies including Ford, British home appliance designer Dyson, UK online grocer Ocado and US computer and printer maker HP. Its position in the supply chain makes it a great buyer of chips.
Len Turrell, chief purchasing and supply chain officer for Flex, said manufacturers that rely on it for the semiconductor industry have fallen short of their expectations for when the shortages will end.
With such strong demand, forecasts range from mid to late 2022 depending on the commodity. Some expect [shortages to continue] until 2023″.
Outlook from Flex, which is at the heart of supply chains for the vehicle, medical devices and electronics consumers industries, after bruising six months during which shortages forced auto companies to cut production and furlough employees.
This problem has led many companies to adopt a more aggressive approach to sourcing, such as paying for chips up front. Tesla, the US electric car maker, has explored buying a chip factory outright.
Electronics manufacturers in Asia also have newly He warned that chip shortages were starting to spread to TVs, smartphones and home appliances, with the situation exacerbated by hoarding by Chinese groups affected by sanctions.
Flex CEO Revathy Advithi said the disruption caused by the pandemic is prompting its multinational customers to take a more serious look at restructuring their supply chains than the US-China trade war. This could include making it more regional, she added.
“Most companies are not going to make the decision to just regionalize tariffs,” she said. “They know it can be a short-lived thing, but things like the pandemic and escalating freight costs that affect total cost of ownership are leading to localization.”
New York-listed Flex, which posted $24.2 billion in revenue last year and has manufacturing facilities split evenly between Europe, Asia and the Americas, has been forced to halt production of a wide range of electronic products.
Chip makers are investing in new production capacity but it could take up to two years to set up the complex’s facilities.
Turrell said the picture could improve if Covid-19 vaccines cause consumer spending to shift toward services and people spend less money on consumer electronics as the world recovers from the pandemic.
However, it cautioned that seemingly small problems – such as the recent two-week shutdown in Malaysia, where many semiconductor suppliers are located – could have a huge impact on supply chains already under stress.