If you work in an industry impacted by the global microchip shortage, you will likely still face disruption over two years since it began.
Dating back to the outbreak of COVID-19 in 2020, which saw demand for electronics peak and trough whilst manufacturers ground to a halt, the lack of microchips (also known as semiconductors) has wreaked havoc on global supply chains. Industries worldwide — from automotive to consumer electronics — have felt the pinch, and though many operations are up and running once again, new obstacles and a backlog of orders remain.
A recent report, ‘Deconstructing the chip shortage’ by Avnet Insights, examined key findings, statistics and trends from the ongoing chip shortage. We have combined these insights with our insider knowledge of how inadequate supply has impacted the lighting industry to offer an overview of the current situation — and what is being done to improve it moving forward.
How has the microchip shortage affected the lighting controls industry?
A Goldman Sachs analysis found that a staggering 169 industries are feeling the far-reaching impacts of the microchip shortage.
Unfortunately, the lighting industry is no exception, as limited supply disrupts the production of everything from light-emitting diodes (LEDs) to digitally addressable lighting interfaces (DALI) required for smart lighting controls.
According to Avnet’s survey, 98% of engineers have found parts access a challenge, prompting lead times to go from six months to two years for some components. Not only has this delayed the production cycle for many projects, but microchip scarcity has also driven up prices across the board.
In 2022, ongoing COVID-19 outbreaks in China are preventing recovery. And Russia’s war on Ukraine is also compounding chip supply issues. At least 50% of the world’s semiconductor-grade neon that is integral to the lasers that make microchips is produced by two Ukrainian firms. Plus, Russia exports over 40% of the world’s palladium, which manufacturers use to coat electrodes and plate microprocessors in chips.
The war has forced both Ukrainian factories to halt production whilst Russia continues to drive up the price of palladium, further protracting the global semiconductor shortage. These events spell bad news for the lighting industry, as modern lighting control solutions depend on chips to facilitate automation and remote connectivity.
Nevertheless, demand for new lighting technology has increased since coronavirus lockdowns — especially in the wake of the ongoing energy crisis and the 2021 United Nations Climate Change Conference (COP26), which outlined new sustainability requirements for buildings.
As lighting consumes as much as 19% of global electricity, tackling supply chain issues and extended lead times is crucial to reducing energy waste and utility bills. So, how can original equipment manufacturers (OEMs) meet this challenge head-on?
How can we mitigate the immediate and long-term impacts of the shortage?
Manufacturers must adopt new tactics to ensure they can retrofit and install up-to-date lighting control solutions for commercial and residential buildings ahead of 2050 net-zero targets.
Avnet’s report revealed that 98% of engineers find the sourcing of parts a ‘significant challenge’ in today’s market, making availability a critical driver in the part selection process. Still, manufacturers can stay reactive by successfully modifying product designs and seeking alternatives for limited components and materials instead of simply waiting for the chip shortage to subside.
The Avnet Insights global impact survey highlighted the importance of accurate demand forecasting and placing orders as early as possible to minimise lead times. But whilst it may be advisable to widen supplier bases, cutting corners is not an option when it comes to quality.
Some contractors have turned to non-authorised distribution channels to secure supply, inviting issues regarding counterfeit parts. Plus, alternative chips are not always compatible once tested, so product developers must consider the overall cost-effectiveness of sourcing new products.
Additionally, post-pandemic supply chain problems have exposed global overreliance on factories in the East, reaffirming the need to secure local supply for the long term. As a result, many lighting control manufacturers are calling for national semiconductor infrastructure development to avoid another unexpected shortage.
Our commitment to securing post-pandemic supply chains
Despite the collapse of general chip manufacturing during the COVID-19 pandemic, the long-term outlook is positive.
Major OEMs are expanding production, and there are signals of improvement in China (expected to support a return to near pre-pandemic levels by the end of 2023), as well as many signs of future supply chain relief from the US and the UK.
As a UK-based lighting control manufacturer with Made in Britain certification, TheisCraft has continued producing innovative, cost-effective lighting controls within consistent timeframes, constantly looking ahead to prevent disruption to our customers.
‘We have already witnessed a commendable level of resourcefulness and resilience within the lighting controls industry amidst widespread disruption — a trend I expect will continue throughout 2022 and beyond’, commented our procurement manager, Nathan Jackson.
‘Thanks to our in-house manufacturing capacity, we have managed to successfully ride out the microchip shortage over the past few years, launching our non-commissionable Multiload Spectrum suite and proactively managing supply chains to keep costs down and ensure delivery’.
Would you like to discuss the needs of your next commercial or high-end residential lighting project? Give us a call at 01252560800 or email info@theiscraft.co.uk to speak to a member of the team!