Shifting trade policies and the ongoing COVID-19 crisis forced the electronics industry in 2020 to adapt even as OEMs struggled to manage shortage mitigation and fluctuating demand.
As this year ends, the electronics industry has emerged leaner, stronger, and potentially ready for growth. A variety of factors, including White House turnover and a continuing pandemic battle, have shaped and will continue to shape the electronics manufacturing landscape as organizations leverage new supply chain, sourcing, and manufacturing skills to remain competitive.
A look at the key trends of the past 12 months provides potential insight into the upcoming quarters as well.
Electronics industry in 2020: Doing old things in new ways
1.Moving to the Cloud:
The global pandemic changed electronics manufacturing. Manufacturers found themselves grappling with using new technologies on cloud platforms to run day-to-day manufacturing, logistics, and supply chain operations. This summer, for example, deployment of hybrid clouds in manufacturing and production companies reached 19% penetration, a figure ahead of the global average, the Nutanix Enterprise Cloud Index found. In two years, it’s expected to more than double to 45%.
Something to consider: The right enterprise technology supports flexibility and agility in hard times
2.Rethinking & expanding sourcing:
Early in the year, Trump launched tariffs on $370 billion worth of Chinese goods, prompting China to levy its own $185 billion in return. Within weeks, China — and soon other countries — closed factories in an attempt to curb the spread of COVID-19, and manufacturers received an abject lesson in the dangers of sole sourcing, lean inventories, and geographically centralized manufacturing strategies.
Takeaway: Lean manufacturing and a narrow sourcing focus create supply chain risk.
3.Shortages & lead time issues:
Manufacturing closures and tariffs also caused parts shortages and lengthened lead times. ResearchandMarkets noted “The ongoing production halt in China has forced other electronic manufacturers based in the U.S. and Europe to hold the production of finished goods on a temporary basis, which, in turn, is leading to the gap in the demand and supply of the electronic products.”
Further, at-home workers began investing in a variety of electronics-based products.
“As the outbreak spread and people around the globe were forced to self-isolate, consumers began buying up new electronics gear to support the shift to working from home, video conferencing, and to enhance their home entertainment experience,” Jim McGregor, principal analyst and partner at TIRIAS Research, said in a Forbes article.
Lesson: Not investing in component inventory may prove costly in a crisis.
4. Obsolescence management:
At the end of an electronics product lifecycle, the availability of spare parts becomes a critical concern. The unpredictability of this year and the associated economic uncertainty for businesses and individuals have potentially slowed the pace of new product adoption. It has also made the ability to repair and maintain existing electronics products critical. Further, OEMs have realized that extending the life of a current product line offers an opportunity for continued revenues during hard times.
Piece of advice: Plan for slow obsolescence to ensure better business continuity.
New year, same challenges
As the world flips the next page on the calendar, the lessons learned this year won’t go to waste. With a new administration, tariff and trade policies will likely evolve and demand quick response within the electronics industry. Meanwhile, the pandemic will be with us a while longer—and serve as a reminder that being prepared for the unknown is a strong business strategy.
To summarize: When 2020 started, no one could have predicted the changes that would come this year or the business shifts that would be created. The electronics industry in 2020, though, stepped up to adjust business practices and deal with harsh business realities as they emerged.