OEMs, listen up. It’s time to commit your orders.

Check out the article below to learn more about the importance of safeguarding your supply chain in the upcoming years.

This isn’t a sales piece. As a trusted partner to OEMs across the world, we’re constantly speaking to suppliers and examining the components market for potential bottlenecks that could delay or hold-up your builds.

Now is one of those occasions.

Admittedly, the market doesn’t seem to be winding down. The past eight months have been relatively steady, with plenty of stock on the shelves. And it seems there are still enough parts to accommodate all types of assemblies for the foreseeable, so why the concern?

Here’s why.

1.    Orders are picking up…

It’s true there’s a lot of stock on the shelves and the industry has been set in a pattern of over-ordering to keep builds on track. This along with non-cancellable distribution terms have created a false sense of security, giving the impression there are more parts than what’s actually available.

As more orders come in, this excess stock will soon dry up, driving up demand within distribution. On its own, this isn’t necessarily a bad thing as it will stimulate production. But that’s not the full picture.

2.    …but investors are focused elsewhere

There has been a lot of money spent on manufacturing in the past year – partly as a response to global shortages in the resistor and capacitor market – and the benefits can be seen with the volume of product sat on our shelves.

The trouble is most semiconductor fabrication is now focused on the AI and EV markets, because they guarantee a minimum level of site output for investors to secure a return. The technology used in these products differs greatly to those used in industrial electronics, meaning there will be far less of the ‘right’ product to go around. And this bottleneck will coincide with businesses competing for what’s left.

3.    And some existing factories have closed

Investors want to see factories at 80% utilisation or higher. But due to a lack of forecasting and light orders from OEMs, at some sites this figure has dropped to as low as 40%. This has led to several factory closures, stretching an already finite resource. And there’s no guarantee they will return if investors are swayed by other sectors in higher demand that rely on entirely different electronics.

Buy now or perhaps suffer later?

In other words, this is the return of longer lead times and reduced capacities, like those seen over 2021/2022. While we shouldn’t overlook manufacturers’ response to the market, it’s not the best news for those seeking strong results in the remaining two quarters of the financial year.

Still, there’s a big difference this time around. We have the knowledge and experience to secure credible alternatives when an originally specified part is unavailable. We also have a robust network of supplier partnerships working solely for our customers. This allows us to be far more agile in the market – and it’s why we were able to post record performances when other CEMs were struggling to get what they needed.

Factories are already reserving capacity and closing order books for 2025/2026, so it makes sense to secure parts while you still can.

Our Purchasing Director, Jack Lucas, has been actively engaging with Offshore Electronics's customer base, including prospecting OEMs, to discuss market trends and industry insights. This initiative has sparked valuable conversations and feedback as to what they are seeing from their side and why some have chosen to get ahead of game and place scheduled orders for all requirement in 2025.

If you are interested in delving deeper into these discussions or seeking further insights, feel free to reach out to him for a comprehensive understanding at [email protected]