Since 1985, Mr. Ron Bishop, founder of Bishop & Associates in the United States, has closely monitored the connector industry. Research and track interconnect product developments, the emergence of transformative technologies, and the activities of the connector companies behind them. Since the first quarter of 2022, the supply chain has continued to face new challenges. The Russian-Ukrainian war, the new coronavirus epidemic in China, and the earthquake in Japan have had a profound impact on the electronic connector industry and its market. To this end, we specially interviewed Mr. Ron Bishop to make a professional analysis on the current situation and future trends.

Mr. Ron Bishop (Founder and President of Bishop & Associates)

The coronavirus pandemic continues. Electronics factories and ports in Shenzhen and other parts of China have closed again due to a new wave of infections. How do you think this will impact the connector industry?

While these events are relatively recent, they appear to have impacted the industry. As far as we know, five large factories have suspended production. Public transport operations have also been shut down and major business districts have been blocked. Some companies appear to be back in business, but shutting down for just a few days can have serious repercussions.

In addition to production, the new round of lockdowns has also affected an already strained supply chain. Highways to major ports have been closed due to traffic restrictions, and workers, including drivers in these affected areas, have been unable to work, causing massive delays in container loading and unloading at ports.

Supply chain issues have been ongoing for over two years. Are suppliers able to build factories in Mexico or elsewhere outside of Asia to help meet demand? What shifts are you seeing?

The topic of re-outsourcing has been debated for more than two years, initially starting with Sino-US relations. The trade war has intensified during the pandemic. A lot of companies are talking about re-outsourcing. Companies like Samsung and Apple have announced they are building factories to support this outsourced work, but many are still in the design phase. In addition to these traditional Asian manufacturing companies, Schneider Electric and General Electric have retooled their manufacturing operations to bring production back to North America. Europe is also thinking about bringing manufacturing back, but we also know it's not an easy task. Restructuring doesn't happen overnight, it will take years and broad local and federal support to implement.

As for Mexico, although many companies have established factories in the region, the COVID-19 pandemic is the main bottleneck. Indeed, industrial activity was hit by rising coronavirus infections, persistent supply bottlenecks and high levels of inflation, according to a survey reported by Reuters. Manufacturing in Mexico shrank at the fastest pace in 10 months in January. "According to information on trade economics, Mexico's manufacturing output in January did increase by 3.76% compared to January 2021, but it is still well below the data prior to March 2020.

How parts shortages are holding back innovation and progress in our industry, or are these challenges leading to better Solutions?

I don't think this hinders innovation or progress, it just hinders mass adoption of these technologies. Engineers now see usability as a key factor when designing products. They also keep a close eye on software and hardware, which often has to be changed if the board changes. Material shortages have also led engineers to choose more suppliers to secure supplies, often turning to traders and non-franchise suppliers, which in turn increases the likelihood of parts being counterfeited and can cause quality problems. Notably, despite shortages in each market, engineers designing in the automotive, telecom and consumer markets appear to be more challenged than others.

How did the Ukraine war affect our industry?

Ukraine has a severe shortage of labor and trained workers. Several companies' automotive cable assemblies are produced at local factories in Ukraine. This situation (and a shortage of semiconductors) is currently causing trouble for European automakers. We have yet to see how it will affect the military and aerospace markets.

How will the Russian-Ukrainian war affect the semiconductor industry already affected by the coronavirus pandemic? span>

The Ukrainian war has a huge impact on the semiconductor industry and the automotive industry. According to Reuters, two Ukrainian companies, Ingas and Cryoin, have stopped neon gas production following the Russian-Ukrainian conflict. Ukraine is an important producer of neon gas, with Ingas and Cryoin accounting for between 45% and 54% of total global neon gas production. A shortage of neon gas, a key material used in chip production, will increase prices and lead times. Although most chipmakers have downplayed the supply of neon gas to Ukraine, saying they have ample inventories. But it remains to be seen how much this shortage of gas will affect the electronics industry. South Korea, the second-largest chipmaker Samsung, recently removed a 5.5 percent import duty on three gases (neon, xenon and krypton), both of which are critical to chipmaking.

Neon andNot the only raw material that could be in short supply. Russia supplies about one-third of global demand for palladium, which is used to make sensors, chips, capacitors, connector contacts, and catalytic converters for cars and fuel cells.

In addition to these two raw materials, the rise in oil prices, not only due to geopolitical sanctions, but also due to labor shortages many producers have been unable to return to the pandemic The previous level also had a huge impact on the electronic connector industry. In addition to rising raw material and finished product transportation costs, rising oil prices have also pushed up the price of engineering plastics, which also affects the cost of most connectors, as well as plastic packaging.

The auto market is under tremendous pressure due to geopolitical conflicts and the coronavirus pandemic, as well as the recent earthquake in Japan. What strategy are connector suppliers using to serve their automotive customers?

Another key issue of the semiconductor shortage in the automotive industry is to start designing some very desirable chips rather than relying on suppliers in the Asia Pacific region. In addition, there will be a strong push to reduce the number of dedicated chips used in future vehicles.

In the field of electric vehicles, one of the key results of the past two years or so has been the decision of automakers to develop, produce and apply lithium-ion batteries. A case in point is Toyota's decision to produce enough battery packs in North America to power more than 1 million electric vehicles each year.

What changes have suppliers made to their organizational structures, supply chains, etc. to withstand these global challenges? ?

They all seem to be trying not to concentrate their supply chains in one country. This will affect China's dominance in electronics manufacturing.

Many connector manufacturers anticipated these difficulties and tried to protect themselves by ordering more raw materials than they normally supply. This is in direct contrast to the pipeline model that most companies have been building to order for the past 20 years. This philosophy is passed on to end customers as we have seen connector bookings grow at an unprecedented rate. As of February, the connector industry had a backlog of 147 weeks and more than $23 million. In addition to stockpiling raw materials, most connector manufacturers invest in finding acceptable material alternatives, as well as finding new suppliers.

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