Adjusting to a Changing Semiconductor Supply Chain Landscape

The electronics supply chain has endured a lot over the last few years. Changing trade policies, the global pandemic, geopolitical tensions and rising business costs are just a few of the barriers companies have been navigating. The added pressure of accelerated innovation has created a desire to move both manufacturing and sourcing “closer to home.”

In Rewiring electronics and technology supply chains for a resilient future, Maersk says its own internal survey found that 67% of companies—all of which are global technology retailers and manufacturers—have “changed their material and component sourcing locations” to find supply closer to key markets. The ocean carrier confirms the motive for ongoing redistribution of supply chains and adjustments to their logistics strategies is driven by the need for additional security, flexibility, and sustainability following major instability in recent years.

“The friction in the market has led to aggressive change in terms of where the tech goods are sourced from,” Maersk says. No vertical has escaped the impact of this friction, as industries like automotive and consumer electronics have historically struggled with lengthy lead times and constrained allocation of important components.

The current level of nearshoring activity is being used as an “insurance mechanism” against instability, Maersk adds, but it also helps companies more rapidly fulfill consumer needs, reduce transit times, and decrease their exposure to environmental, social, and governance (ESG) issues.

A Finger on the Pulse of Logistics Trends

As a global independent distributor of electronic components and finished goods, Fusion Worldwide has its finger on the pulse of the industry and understands the challenges and opportunities in the current business environment.

“The numerous supply chain disruptions over the past two years have highlighted the fragility of offshoring—a business operations model introduced in the 1960s where manufacturing was outsourced to Asia,” Fusion Worldwide explains in the 2022 article Nearshoring, a Strategic Response to the Current Supply Chain Model.  The article goes on to discuss how more organizations are “transferring options back” to nearby countries (versus offshoring activities to far-off countries).

“One year later, we’re seeing more movement on the nearshoring front as companies have begun the expansion that was announced in 2021 and 2022,” Fusion Worldwide points out. “The challenges we highlighted around it being a costly and lengthy process have remained, but there have been added challenges associated with finding the talent to staff these facilities.”

Despite the benefits of offshoring, the global supply chain has been threatened by trade wars, extreme weather events and limited geographic distribution in manufacturing. Due to these and other drawbacks, manufacturers are increasingly enticed by the possibility of nearshoring as a strategic solution, Fusion Worldwide says.

Tips for Electronic Component Supply Chain Success

Just as outsourcing to Asia greatly changed the supply chain, a switch to a nearshoring method will have a similar impact and cause a ripple effect through the countless industries that rely on electronic components. Nearshoring will introduce changes to the end-to-end supply chain as sourcing partner dynamics are altered, possibly influencing lead times and pricing as supply chain management will shift once these new facilities come online.

“If companies aren’t proactively planning around what this new supply chain might look like, they could lose out on valuable opportunities to inject resiliency into their business models,” Fusion Worldwide cautions.

If possible, plan around some of these locations by building strategic partnerships with global sourcing partners that either have personnel in those markets or are experienced dealing with sourcing on a global level. Independent distributors like Fusion Worldwide, for example, have worldwide connections and capabilities that help their customers better manage their electronics supply chains.

“Nearshoring can help companies build a resilient technology supply chain that keeps them ahead of the game even in the face of constant disruptions,” Fusion Worldwide says. The company advocates for a diverse supply chain by including a distributor with suppliers in your region. In most cases, these are the most resilient supply chains because they allow companies to draw on multiple resources in the event of one strategic partner being unable to support sourcing needs.

Planning for the Future of the Supply Chain

Looking ahead, Fusion Worldwide wants electronics buyers to know that changing material and component sourcing locations requires considerable time and investment. With so many countries redistributing their supply chains, it’s important to note where most of the new hubs for the industry will be located. For example, you can read about how India Enters the Race to Become the Next Semiconductor Powerhouse and click here to learn how nearshoring is being used as a strategic response to the current supply chain model.

Preparedness starts with understanding the current landscape, and Fusion Worldwide knows how to navigate the market no matter its conditions.

About Fusion Worldwide

Fusion Worldwide is the leading global distributor of electronic components and products. We source, inspect, test, and deliver a broad range of components to a large and diversified customer base that includes OEMs, CEMs, and ODMs across a wide array of verticals. Contact us today to learn how we activate our global network to get you the parts you need, when you need them.

To learn more about our strategic sourcing and inventory management solutions, visit fusionww.com and follow Fusion on LinkedIn.