By: Beroe Inc --
14 June, 2020
COVID-19 has affected nearly 210 countries worldwide, impacting the manufacturing sector in a major way, including the markets for metals, electronic systems, external manufacturing, and precision plastics.
Across the globe, the medical sector is in top priority where raw materials relevant to ventilators and other essential medical equipment are available more easily, compared to other segments, according to Beroe.
Manufacturing activities are slowly resuming in segments such as electrical equipment, electronics, fertilizers, construction, etc., with 10-15 percent capacity initially.
Dominant supply bases for mechanical and electrical components have been impacted by COVID-19 in China, U.S., India, Germany, Japan, South Korea, and Italy.
For electronics, supply bases have been affected in Italy, Philippines, France, India, Spain, U.S., Mexico, Malaysia, and Vietnam. Passive component manufacturing bases like Philippines, Malaysia, and Indonesia have witnessed significant impact with temporary plant closures and logistic shutdowns which is partially compensated by reopened plants in China, South Korea and minimal closedowns in Japan.
Medical grade chemicals and medical component/equipment related manufacturing processes such as plastic injection molding, die casting, metal fabrication, etc., are currently supporting the demand from the healthcare Industry.
There has been a significant inflow of demand from the medical sector for medical ventilators and demand from data centers and enterprise solutions resulting in extended lead times. However, due to supply disruptions and plant shutdowns, the electronics market has witnessed a significant slump in the market value, up to 5-6 percent.
Globally, lead times are expected to witness a 40 percent increase due to logistics restrictions and slowdown in production operations. Pending approvals from the respective government authorities to resume operations is also expected to contribute to lead time delays.
Considering the current situation and extended lead time, many organizations have rerouted their supply chain to domestic suppliers. Partial resumption of manufacturing activities and anticipated relaxation in logistics in few countries like India is expected to ease lead time concerns.
As a result of the coronavirus pandemic limiting the movement of goods, the dependence on domestic/regional suppliers has increased relatively in order to meet short term/ ad-hoc material demand.
Due to large pandemic spread, there has been a significant reduction in the labor return rates, however, for component manufacturing, the labor requirement is comparatively minimal due to automation.
Small scale industries, special economic zones, construction, manufacturing of essentials and medical components, and food processing, have been allowed to function in most countries who have relaxed the lockdown restrictions.
Certain industries such as Telecom, Cement, Fertilizer, Paper and Pulp, Electronics, Electrical equipment such as Transformers, Switchgears, Motors etc. have resumed operations with a capacity of 20-25 percent per shift.
According to the China Association of Automobile Manufacturers, car sales in China have reportedly dropped by approximately 42 percent Y-o-Y in Q1 2020. Covid-19 shutdowns have led to relative production loss of 60,000 units each for Chevrolet, Honda, Toyota and Nissan.
TSMC semiconductor wafer manufacturers from Taiwan have not witnessed any decline in customer demand, and are expected to see around 12 to 13 percent growth, especially due to high performance computing and data centers for Q2 2020.
Procurement from alternative sources has led to inflation in both component prices and logistics costs. Limited availability of raw material, partial resumption of operation, restriction in logistics and prolonged lead times have considerably impacted the prices of products as well as spare parts.
The supply demand gap is low as both the supplier production and end-use EMS/OEMs demand is affected which results in limited price volatility. Additionally, more closedowns in Southeast Asian nations may impact price during the Q2, especially for MLCC and resistors.
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