The Chip Shortage: “We’re in it Together.”

ADCO Strengthens Communication and Transparency in Face of Challenges.

The global and domestic electronics manufacturing industry is facing one of its greatest challenges in history — a global shortage of microchips — and there doesn’t appear to be an end in sight. For assembler ADCO Circuits, a focus on robust inventory management and planning, along with excellent customer communication and transparency, is allowing the company and its customers to navigate the shortage smartly.

Like many current global challenges, this shortage initially began as a result of the COVID pandemic. Industry workers around the globe were unable to go to work, plants were closed, and production halted, which led to a lack of supply. The movement of that supply was also slowed down by tighter restrictions at ports and international borders. The United States’ long reliance on offshore manufacturing is compounding the problem.

As the demand for components continues to rise in the U.S. and congestion at shipping posts compound the problem, manufacturers and assemblers like ADCO are finding the greatest challenges at the beginning of the supply chain.

"Raw materials are in low supply or completely unavailable, and the chip shortage is highlighting the need for a vast array of solutions, including shifts in U.S. policy," said ADCO VP of Sales, Marc Damman. "It will take time to resolve. Investing in additional domestic manufacturing and ramping it up with skilled labor is no minor task. We don't foresee the increase in demand to abate any time soon either. However, our positive relationships up and down the supply chain help us set realistic expectations that we communicate to our customers."

Although there are no immediate easy solutions, the situation has put the American electronics industry at the forefront of many new policies in D.C. Proposed federal funding for domestic chip production may help the industry overcome the challenge. Legislators are currently considering the proposed CHIPS for America Act, which is part of the 2021 National Defense Authorization Act. The bill includes $39 billion in production and incentives and $10.5 billion for implementation.

“This is a step in the right direction,” said Damman. “More can be done. Investing in education, training, and procurement across the entire domestic supply chain is critical. Government policy and financial investments will help to make sure we can keep up with other countries in chip manufacturing, now and into the future.”

Any solutions to the chip shortage will require time, effort, dedication, and cooperation across the electronics industry. Ultimately, market forces are going to drive the solution in the U.S. Without a cohesive strategy to reduce the reliance on overseas procurement, other pandemic-related supply challenges, including packaging and shipping shortages, could cripple the industry.

The issue will continue to get attention. The electronics manufacturing industry is the backbone of the modern economy, generating more than $700 billion a year in U.S. GDP and jobs for more than five million people. Successfully navigating the shortage is critical and Damman remains optimistic.

“Right now, we are committed to meeting the challenges we can control. ADCO has invested in incredible inventory and planning systems that keep us fully integrated with suppliers to deliver as quickly as possible. We have full transparency in everything we do with our customers and are realistic about availability,” he said. “We remain intensely focused on the thing that our customers rely on us for: smart front-end engineering for the most complex assemblies".

www.adcocircuits.com

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