YOUR SUPPLY CHAIN BULLETIN FROM MILWAUKEE ELECTRONICS ELECTRONICS MARKET UPDATE - Milwaukee ...

May 12, 2021

     YOUR SUPPLY CHAIN BULLETIN FROM MILWAUKEE
                   ELECTRONICS

                   ELECTRONICS MARKET UPDATE
As we enter the second quarter of 2021, we are edging ever closer to the highly
anticipated ‘new normal’. But the electronics manufacturing industry, like so many
other industries, is still riding the wave of the coronavirus pandemic. Here is the
latest monthly roundup of key developments in the global electronics component
market. What does the rest of 2021 have in store for our industry?

Main Highlights
March 2020 was the beginning of the global lockdown due to the Coronavirus.
Just over 12 months later and some countries look to be heading out of lockdown
with the vaccine rollout in full swing and restrictions slowly beginning to lift. The
same, however, cannot be said for global supply chains that manufacturing
companies are currently managing.

Although we are now seeing some positive recovery from the pandemic, some
countries are amidst their third wave of the virus, with continued and extended
lockdowns and curfews in place in France, India, Italy, Belgium, Spain and Czech
Republic.

In news away from COVID-19, the Ultra Large Container Vessel (ULCV) ‘Ever
Given’ became beached in the Suez Canal on 21st March 2021 with rescue
attempts finally freeing the ship and successfully re-floating it on 29th March.
Having been stuck for six days, it was reported to have held up over $57B of the
world’s global trade.

Capacity and Lead-Time Issues
There are still significant supply disruptions to electronics and electro-mechanical
supply chains, as well as packaging, metal, and raw materials. Lead-times are
continuing to extend with most products affected and prices are continuing to rise.

     A large fire broke out at a Renesas plant in Hitachinaka, northeast of Tokyo
     in Japan, causing significant damage to plant equipment, loss of WIP and
     contamination of clean rooms. Two thirds of the chips damaged were

300mm semiconductors destined for the automotive market which is
    currently at a peak of demand.

    Taiwan is currently suffering the worst drought the country has seen in over
    50 years. Taiwan Semiconductor Manufacturing Corporation (TSMC) are a
    foundry manufacturing product for a number of semiconductor
    manufacturers who are ‘fabless’, but also support manufacturers who have
    their own fabs. When manufacturing wafers for semiconductors, between 2
    and 4 billion gallons of ultra-pure water is required per day.

    Micron is working through DRAM (DDR3 specifically) backlogs in their
    Taiwan fab, however there is now a real danger of further issues due to the
    drought which has the potential to cause allocation on memory lines fairly
    soon.

    Distributors, driven by manufacturer behaviors, are increasingly refusing to
    allow buffer stocks to be held on behalf of the customer and are instead
    favoring scheduled orders. As the message has been now for several
    months – forward orders are crucial to mitigating some of today’s supply
    chain issues and are critical in securing product for the second half of 2021.

    Austin, Texas is home to many semiconductor manufacturing plants
    including NXP, Infineon and Samsung. America suffered some exceptional
    weather in February 2021, caused by ice storms and tornadoes. To
    conserve power, semiconductor plants in Austin were made to halt
    production. Factories were shut down in a controlled way with both
    Samsung and Infineon back online within a week, whereas NXP took around
    4 weeks to get back fully online.

    Supply constraints are now across all manufacturers, all products, and all
    sectors. This is no longer limited to the automotive sector, semiconductors
    or specific manufacturers such as Microchip. It is critical for supply chains to
    have full visibility of customer demand to allow orders to be placed to
    secure stock for the remainder of 2021, and in some instances 2022.

Manufacturer Mergers / Acquisitions
    Renesas Electronics are set to acquire Apple chipmaker Dialogue
    Semiconductor for a reported $4.9B - strengthening Renesas’ global
    footprint across IOT, industrial and automotive sectors.

    Hitachi acquires GlobalLogic in a $9.6B deal. Approval is set to be given by
    the end of July 2021.

PCB Technology
    Lead-times for both onshore and offshore manufacturing are extending. The
    Chinese economy is still recovering from the damage of COVID-19 and
    demand is outstripping available capacity in the Far East, pushing more
    builds into Europe and the US.

Shortages of copper-clad laminates continue which is pushing prices up
     globally and extending lead-times for material. · Two explosions at epoxy
     resin plants in China have had a significant impact on resin supply and
     availability in China.

     As well as laminate availability and pricing, PCB manufacturing is also
     reliant upon copper, silver, gold, aluminum, lead, tin and nickel and these
     raw material prices are increasing globally.

Pricing Uncertainty
     Raw material shortages and exponential price increases are still being
     heavily re-aligned to corrugated cardboard. Raw material is on back order
     for several distributors who have confirmed pricing is by application only.
     This is fueling existing paper/cardboard shortages with paper mills
     increasing prices and many only supporting existing demand to try to keep
     up with capacity for longstanding customer.

     Manufacturer price increases are frequent and often multiple increases are
     being observed over several weeks. This is a global issue, affecting all
     products, commodities, manufactures and supply chains.

     Common polymer material Polypropylene has increased by 30%, whereas
     styrene has increased by 60%-70% . The polymer constraints are expected
     to continue throughout this quarter but could ease in Q3. Oil price increases,
     as well as strong Asian demand, power outages in the USA and weather
     disruptions have all fueled this situation.

Global Economy
     Oil pricing has continued to climb over the last quarter with a barrel now
     costing $63.71 - a $12 increase from January 2021.

     Copper is continuing to increase sharply in price. Copper fell slightly with
     news of the ‘Ever Given’ vessel becoming stuck in the Suez Canal, however
     generally it is on an upward trend. It has increased by $870 per ton since
     the start of the year, and by $2379 per ton since 1st October 2020. At time
     of writing, pricing is $8778.50 per ton on the LME

The electronics manufacturing industry is in the midst of extraordinary times. But
though there may be some way to go before the market stabilizes, there is light at
the end of the tunnel. In the meantime, forward orders will be critical for securing
product for the rest of 2021 and into 2022.

                        WE ARE HERE TO HELP.
 During times like this, It is highly recommended to extend order coverage
    as much as possible to identify supply chain issues early on, when
                           mitigation is still possible.

We may recommend changes in purchasing volumes and forecasts to mitigate
                                 risk.

Gary DeGrave, Corporate Director Supply Chain
Milwaukee Electronics

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