Shenzhen, China Shut Down will Further Deepen Electronic Component Shortages

We buy excess electronic components

The Shutdown imposed over the weekend has already had a detrimental effect on the World’s biggest electronic manufacturing district. Warehouses are being forced to shut down until at least March 20th. A little over a week doesn’t seem like that big of a deal until you take a deeper look at the ramifications. Shenzhen is now at a stand-still with 17.5 million residents being advised to work from home, non-essential companies shut down by the government, and no outsiders allowed into the area, including trucks carrying factory shipments. 

A halt in the production of key electronic components doesn’t just mean longer wait times and shortages, but wasted materials. As factories sit, materials that have a short life, expire and can no longer be used (ex. Adhesives, etc.). Major electronic companies use parts from Shenzhen factories and are now relying on the little stock they have. The already massive shortage in the technology industry will unwillingly be affected for months to come. The best way to navigate the shortage is to find existing stock through excess marketing channels outside of China. 

This closure has not just affected the businesses that manufacture chips and electronics, but also their transportation. Yantian Port, which is the 4th largest in the World, remained open Wednesday but is still at risk of being closed. Port workers, truckers and factory workers are staying home due to the recent Covid outbreak, which is causing delays in the movement of containers from the ships at the port. The ships that port at this location carry thousands of containers with materials and parts for the production of electronic components and their final products. With 90% of China’s electronic shipments passing through Yanitan, a closure will take months to navigate the subsequent backlog.

Covid closures in Shenzhen will affect more than just the communities. The backlash will take months to repair and the small steps towards normalization have reversed. 

If you have shortages you need to fill, pairing with a mature excess procurement partner, like iBuyXS, allows you to gain access to excess stock sellers worldwide. IBuyXS has unique access to channels of factory packaged components. Our top notch staff is here to help source the shortages you need and sell the excess you have. 

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Russian Invasion and Sanctions Set to Cripple Global Chip Supply

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Russia and Ukraine are important in the supply chain of components for semiconductor manufacturing. They produce important rare earth metals and gasses, which are critical in the production of computer chips. Russia is the single largest source of Palladium in the world with more than 40% of the world’s supply and Ukraine is a leading exporter of neon gas. The shortages in these key materials will result in even higher prices and longer lead times. 

“There is tremendous concern that Russia, a key exporter of palladium, is going to face severe disruptions as the flight bans are going to impose big trouble in getting supplies to different places,” said Edward Moya, senior market analyst at OANDA.

How can supply professionals bridge the gap between current demand and long lead time delays from the factory when there are no parts in distribution? The best way is to find existing stock, primarily through excess market channels. 

The Palladium market already has tight inventories and now the geopolitical risks are going to lead to severe supply shortages. MLCC capacitors, memory, and sensors are at the top of the list of chips to be affected by a Palladium shortage. On top of the already increased shortage of chips, electronic manufacturers are also competing with the automotive industry for Palladium as more companies are moving towards electric vehicles.

Neon gas is used for the most critical process – etching circuit designs into silicon wafers to create chips. Ukraine extracts neon gas during the purification process of a by-product from Russian steel manufacturing. It is said that most companies only have a six to eight week stockpile of neon gas that can be used in production. The scramble for stock has already started and is not projected to balance out until at least 2023, according to White House analytics reporting.

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iBuyXS Can Help You With Your Supply Chain Needs

Contact one of our product specialists who will quickly respond to your critical supply chain needs at 1-800-290-5066 or click the button below.

Hua Hong’s 3rd and 5th fabs suffered a sudden power outage to suspend production, which may exacerbate the problem of chip supply

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Hua Hong Semiconductor’s third and fifth factories in Shanghai suffered an explosion due to a short circuit in the transformer in the distribution station. The production lines of both factories are currently affected and suspended.

A combination of tougher emissions standards, coal supply shortages, and increased demand from manufacturers have sent coal prices sky-high in China. Due to this, China has had to halt production at multiple factory sites—including sites used to supply Apple and Tesla—to curb energy usage and ensure that residents in North China have enough energy to remain warm during nights that now approach freezing temperatures.

Hua Hong Semiconductor’s (HKG) wafer fab in Shanghai reported a power outage (January 8). Industry sources revealed that the accident was caused by a short circuit in the transformer in the distribution station, causing an explosion and power outage. As Hua Hong Factory No. 3 and Factory No. 5 share the power distribution station, both factories are temporarily unable to operate.

Generally speaking, in order to prevent sudden power outages, fabs are equipped with large UPS uninterruptible power supply equipment and diesel generators for emergency power supply. In the event of a sudden power failure, the UPS can support the power supply for about ten minutes, allowing the crew to start the backup generator to ensure the continuous production line, and more importantly, to protect the precious equipment from damage.

However, according to Chinese media reports, Hua Hong insiders pointed out that the accident was serious. Not only did all the machines in Hua Hong’s third factory shut down, but even the UPS of the fifth factory’s lithography machine could not support it, and it has not yet resumed operation.

Because the wafer manufacturing process is quite long, a power outage not only puts the wafer in production at risk of being scrapped, but it can also take up to several days to resume operation after the equipment is shut down.

Hua Hong’s third plant has a 90-nanometer process, mainly producing power semiconductor chips, with a monthly production capacity of 53,000 8-inch wafers. Hua Hong Factory 5 is the group’s first fully automatic smart production line and the first 12-inch wafer foundry production line, with a monthly production capacity of 45,000 wafers and a manufacturing process ranging from 55 to 28 nm. Downstream customers include almost all electronic product.

If the power outage and shutdown of the two factories are as serious as the sources said, it will make the chip supply problem worse.

iBuyXS Can Help You With Your Supply Chain Needs

Contact one of our product specialists who will quickly respond to your critical supply chain needs at 1-800-290-5066 or click the button below.

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Component Plants Shutdown Due to Power Cuts in China

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The ongoing power shortage in China has affected multiple electronics supplier sites within the region. Which areas are affected most?

A combination of tougher emissions standards, coal supply shortages, and increased demand from manufacturers have sent coal prices sky-high in China. Due to this, China has had to halt production at multiple factory sites—including sites used to supply Apple and Tesla—to curb energy usage and ensure that residents in North China have enough energy to remain warm during nights that now approach freezing temperatures.

Where are the power cuts taking place?

Prominent manufacturing plants operating in China are experiencing production cuts and entire shutdowns due to ongoing energy cuts.

Tracker and timeline for affected regions:

  1. Guangdong:
    1. Guangdong Power Grid stated that it will implement the “on-two-stop-five” power plan from September 16 till 30th, and implement peak shifts on Sundays, Mondays, Tuesdays, Wednesdays, and Thursdays, and only reserve peak-shift days, the security load will remain below 15% of the total load, and the peak shift time will be 7:00-23:00.
  2. Jiangsu:
    1. Enterprises are generally required to start two and stop two, the tentative duration of power rationing will be 15 days till September 30th.
    2. Taizhou Xinghua, Nantong, and other places issued notices that all industrial enterprises must suspend production, and the expected power outage period will expire at 24:00 on October 8th.
  3. Jilin:
    1. The Northeast Electric Power Management Bureau and the Jilin Provincial Energy Bureau will implement irregular and unannounced power outages. This situation will continue until March 2022.
  4. Shandong:
    1. Power shortage 9 hours per day from 15:00-24 lasted until September.
  5. Zhejiang:
    1. Zhejiang’s high-energy-consuming enterprises (printing and dyeing plants, chemical plants, and chemical fiber plants) would shut down from September 21 to 30th, several steel companies in Zhejiang have been ordered to reduce power.
  6. Sichuan:
    1. Suspend non-essential production, lighting, and office loads.
  7. Ningxia:
    1. High energy-consuming enterprises stop production for one month.
  8. Shaanxi:
    1. Enterprises have implemented measures such as reducing the operating load of their production lines and shutting down submerged arc furnaces to limit production to ensure a 50% production limit in September, Shaanxi’s power curtailment will be till the end of the year.
  9. Chongqing:
    1. Some factories cut off power production in early August, and the deadline is yet to be determined.
  10. Henan:
    1. Some processing enterprises have limited power for more than three weeks.
  11. Liaoning:
    1. Province has initiated orderly electricity usage measures, 3 rounds of level II (load gap 10-20%), the impact of electricity use is extended to residents and enterprises that do not implement orderly use of electricity.
  12. Anhui:
    1. There is a gap of about 2.5 million yuan in the balance of power supply and demand, the supply and demand situation is very tight.
    2. It is decided to start the province’s orderly electricity use plan from September 22.
  13. Shanghai:
    1. From September 27th till October 3rd a widespread planned power outage will hit many areas.

Energy cuts in the Jiangsu and Guangdong provinces could have a significant impact on the electronic components industry. At least 121 Tier-1 sites could be affected by the power cuts, while at least 35 Sub-Tier sites could experience disruptions in output. Significant suppliers operating in this region include Samsung, ON Semiconductor, Lattice Semiconductor, Celestica, Walsin Technology, Micron, and more.

Significant electronics commodities produced in these regions include:

Uncut Wire and CableCapacitorsResistors
Pb-Free Printed Circuit BoardInductors/TransformerMisc. Passive Comp
SemiconductorsDiscretesMechanical Hardware
Cooling ComponentsElectrical ConnectorsPrinted Circuit Board
Mech FabricationsFPGAs, PALs, PROMsPrinted Circuit Assembly
Pb-Free Printed Board AssemblyCable AssembliesOEM Assemblies
Complex AssembliesMech Sub-AssembliesAnd More

Electronic components and heavy industry firms are all affected by the power cuts. Industry insiders predict prices to rise for suppliers experiencing disruptions, and some suppliers may even put a halt to new orders.

iBuyXS Can Help You With Your Supply Chain Needs

Contact one of our product specialists who will quickly respond to your critical supply chain needs at 1-800-290-5066 or click the button below.

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