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I wonder to what extent this will impact the music industry.

Has anyone had difficulty getting passive components recently?


Current Component Shortages
(and How to Survive Them)

Tomáš ZedníčekPOSTED ON 11.6.2018
Source: Jabil blog

Jabil shared their view on the current component shortages and how to survive them.

Managing 700,000 parts across 27,000 suppliers at any given time provides us with unique insight into key commodity trends, strategies and shortages. Therefore, it goes without saying that it’s been an interesting few years in direct procurement.

Since 2017, companies managing electronic components have been facing challenging times with successive waves of supply shortages, price hikes and lengthening lead times. A major surge in demand on one side and a critical shortage of parts and materials on the other are straining capabilities to meet demand. As a result, the market today is extremely constrained, especially for more standard passive components such as multilayer ceramic capacitors (MLCC), resistors, transistors, diodes, and even memory. Many suppliers are quoting lead times between six to 12 months at best.

We haven’t seen anything like this since 1999, when lead times for tantalum hit a high of more than 52 weeks and created widespread supplier allocation due to unexpectedly high OEM demand. Suppliers eventually added additional capacity, but price increases and supply shortages continued until demand stabilized and technology shifted. What is contributing to today’s turbulent landscape?

As suppliers review their portfolios and make calculated bets on investments, they are shifting their capacity to leading-edge technologies that primarily support the automotive, smart phone and Internet of Things (IoT) markets.

How Automotive Influences The Passives Market

The automotive industry has been experiencing a rapid transformation with products incorporating electronic components at an unprecedented rate. While we may be a few more years away from fully autonomous vehicles, cars are evolving to become even more sophisticated: with embedded software, sensors, artificial intelligence, connectivity, and yes, electrification.

Think of today’s standard combustion engine car, which has somewhere between 2,000 to 3,000 capacitors. As the electric vehicle gains market share, this creates an overwhelming growth in content—with up to 22,000 MLCCs required in a single car. This number will continue to grow as more functions become electrified.

Automotive-grade electronics sell at a higher price, due to the additional requirements around warranty and liability. Demand from the automotive sector is also somewhat stable with accurate forecasts. This makes the automotive market a high priority for passive suppliers.

Miniaturization in Smart Phones Leads to Component Supply Shortages

The smart phone industry is constantly on the move. As consumers expect the release of a greater model each year, leading smart phone launches have become anticipated events. For passive components and memory products, smart phones represent a significant part of overall consumption.

The math is simple but insightful. There are approximately 1.5 billion smart phones manufactured per year and each flagship model contains roughly 1,000 capacitors. With the total global output of MLCC sitting at roughly three trillion pieces per year, you can quickly deduce that nearly 50 percent of the MLCC output goes directly to smart phone manufacturers. This makes the smart phone market the primary driver of consumption and technology.

Don’t expect smart phone component needs to slow down anytime soon with content growing year over year. With each new model, more components are required to keep up with consumer demands. Users don’t want bigger smart phones; therefore, OEMs drive a miniaturization strategy to use smaller components and introduce additional features to the handset.

How does the IoT Boom Affect Component Supply Shortages?

There will be more than 20 billion IoT devices deployed by 2020 according to Gartner, representing more than 100 percent growth in the number of these devices in the next two years. OEMs are working to leverage connectivity features to their advantage, introducing electronic components to previously analog products—doorbells, light switches, paper dispensing products and more.

This explosion of growth unlocks new business opportunities and models for OEMs worldwide, but it creates additional demand on an already constrained market.

Where are Component Supply Shortages Headed?

These moves have created a high-risk environment for mature, less-profitable product families. Suppliers that continue to manufacture components for legacy products will only produce parts at profitable levels, leading to price increases for the wider customer base.

As we look toward the next five years, you can expect a supply recovery on products that are attractive investments to suppliers—the latest and greatest technologies. We should expect some relief in late 2019 from the current supply shortages. Meanwhile, We can expect to see ongoing supply issues in legacy and mature products. OEMs that don’t transition to modern components further up the technology curve must be prepared to battle for components every single day.

In a Supply Shortage, Relationships are Key

In an effort to keep the market somewhat balanced, suppliers are turning to allocation methods. When supply is short of meeting demand, suppliers allocate a percentage of their output to each customer. This means that each customer may get a percentage of the demand they have for a specific product.

The allocation process is tough on all buyers of components and requires constant contact with the suppliers to ensure receipt of components for the product they need versus the product the supplier wants to support.

During shortages, suppliers determine who to support. We can’t emphasize the importance of supplier relationships enough. Whether you are doing the work yourself or outsourcing to a manufacturing solutions provider like Jabil, strong supplier relationships are essential to surviving component shortages. But let me clarify. These “strong” relationships don’t begin during supply shortages; they must be established during a buyer’s market.

Surviving a Component Supply Shortage as an OEM

The decisions you make right now will affect your longevity. These types of supply shortages separate the good from the bad and there are companies that will struggle to meet their production goals if they are not taking today’s market seriously and responding to the component/technology evolution.

Although there are no silver bullets to success, there are several steps companies can take to stay ahead of the market:

  • Continually evolve product design to align with supplier’s technology and production roadmaps
  • Add new alternative suppliers
  • Move away from single sourced parts
  • Increase collaboration and visibility between product design, procurement and supply chain organizations
As basic as it sounds, having multiple sources per part is no longer just a nice-to-have – it is a requirement. In today’s market, with inventory drying up in the channel and options becoming limited, having the ability to rapidly select alternative qualified suppliers and keeping your products on schedule is even more critical.
 

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I suppose what classifies as a "shortage" depends on how much of a supply you need. What has implications for a company like Samsung, that anticipates producing tens of millions of units of their products, has little implication for a boutique pedal or amp-maker that aspires to maybe hundreds or thousands of units a year. Moreover, when a company has a great many investors, there is an assumption that the company will not suddenly decide to stop producing its flagship items and take a few years off. Boss and Yamaha are unlikely to "go Klon".

Finally, as much as more and more manufacturers of musical gear are using surface-mount technology, there are still plenty using good old-fashioned through-hole, and the supply of that shows little sign of dwindling. Keep in mind that there are plenty of boutique manufacturers still churning out pedals using components that haven't been manufactured in over 50 years.

The same is largely true of wood and acoustic-guitar manufacturers. If you expect to crank out hundreds of thousands of acoustics each year to the world market, you look for a supply of a given species of wood that can yield reasonable consistency and availability for that volume of production. If you turn out 40 custom 6-string basses a year, you can be very picky about the types of exotic hardwood you use, because you don't need quite as much. One log may provide the needed consistency and volume.
 

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I was thinking mainly of the impact on the huge companies in the music business (e.g., Yamaha).
 

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I'm wondering where we are going to get all the cobalt and lithium to switch everything over to electric. Invest!!! Elon's giga factory alone must use a shitload
 

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I believe Mike Matthews made a fortune in the 80's manufacturing discontinued chips in Russia.
I was under the impression it was the reverse. That is, he took a beating when Panasonic made a point of selling the bucket-brigade chips required for the Memory Man to Japanese manufacturers. That "patriotic" gesture nearly broke EHX. The chips in question recently started being manufactured again by Chinese company Xvive.

What Matthews DID do in Russia was get tubes manufactured. Iron Curtain countries maintained tube-production facilities when Western countries had let tube manufacture die out. Tubes continue to function during nuclear fallout, where solid-state devices apparently don't. So the USSR continued to produce tubes in former Yugoslavia and Czechoslovakia, among other places, as a way of "being prepared".

The complete history, as told by Matthews, including the real scoop on Russian-made chips, is in this interview: Mike Matthews
 

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I was under the impression it was the reverse. That is, he took a beating when Panasonic made a point of selling the bucket-brigade chips required for the Memory Man to Japanese manufacturers. That "patriotic" gesture nearly broke EHX. The chips in question recently started being manufactured again by Chinese company Xvive.

What Matthews DID do in Russia was get tubes manufactured. Iron Curtain countries maintained tube-production facilities when Western countries had let tube manufacture die out. Tubes continue to function during nuclear fallout, where solid-state devices apparently don't. So the USSR continued to produce tubes in former Yugoslavia and Czechoslovakia, among other places, as a way of "being prepared".

The complete history, as told by Matthews, including the real scoop on Russian-made chips, is in this interview: Mike Matthews
I was referring to the period after Electro Harmonix went out of business, but before he started importing tubes. I've heard him refer tot his in interviews.
 

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wow it's easy to find bucket brigade chips now? I have an old memory man that had been scavenged for parts, I need some

I don't like Mike Matthews, primarily because he drove the "winged C" tube manufacturer out of business. and they made fantastic tubes.

didn't he buy the rights to the global "Svetlana" brand, forcing them ( the old Svetlana factory ) to change their name to "winged C" and lose international market awareness? and then he sold crap tubes branded as "Svetlana"
 

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To make a very long story short, the availability issue is largely with the initial MN30xx series. Those were spec'd to run on supplies as high as 15Vdc. Because they were produced during an era when the majority of guitar players powered most things with batteries, there was an issue of setting the bias voltage (required for any and all bucket-brigade chips) in a "drift-free" manner. The solution arrived at was to develop the MN32xx series of chips that would work at lower voltages, rendering them somewhat immune to battery-weakening.

The 9V battery used to power the pedal was dropped to a stable 5V to power the delay chip/s, using a small voltage regulator, and the bias voltage derived from that. The regulator requires at least 2V input more than its output, so that as long as the battery hadn't dropped down below 7v, the power and bias voltage to the delay chip would remain as rock-solid as if it was being powered by a wall-wart.

An elegant solution, but in an era when entire pedalboards are being powered by well-regulated high-capacity power supplies, the caveats that came with trying to power the MN30xx chips no longer apply, and it is once again possible to take advantage of their better audio specs (nothing has changed about their basic architecture or delay-time capabilities). Panasonic discontinued making BBDs in the early '90s. Due largely to the Asian demand for karaoke machines that HAD to have some echo to them, the Beiling company began re-producing several of the MN32xx chips under their company name (under license, I guess). More recently they were supplemented by the Behringer affiliate - Coolaudio. And even more recently, Xvive started making the highest-capacity delay chips, the 3005, which numerous pedal-makers have incorporated into their analog delay pedals.

Things reached the zenith of stupidity and desperation in the Maxon AD-999, which used eight 1024-stage chips to provide the same delay time as two (unavailable) 4096-stage chips. Actually, let me correct that. There were, and continue to be, all original MN3005 chips "on the market". But a) they are sometimes counterfeit or otherwise unusable, b) only exist in tiny pockets and handfuls here and there....essentially "remainders" rather than "supplies", and c) are pricey enough when found and verified that only those desperate to repair a cherished device will pay the required tab. Much too expensive for a large company to use in a product line they hope to sell many of. Until Xvive brought them back. The rumour mill indicates that the MN3007 and possible MN3004 may also be revived. Sadly, no one has yet to attempt bringing back the much sought-after Reticon delay chips.

In any event, this is why I distinguish between the two broad categories of "shortage/availability". There's the volume that you and I would need for a repair or hobbyist bench, which is distinguished from the volume that a company investing hundreds of thousands of dollars into a product line would need to have. The one can continue to exist long after the other has become impossible.

 

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thank you, for the detailed explanation!
 
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