9DECEMBER - JANUARYTrying to get that balance right between not having huge amounts of stock and being able to have a rapid reaction to demand is absolutely crucialrelationships are being built with customers in every country and it has opened up a whole new world. Everyone operating in the microcontroller market around the world has been able to get closer than ever. This simply wasn't possible 10 years ago and it's had a massive influence on market growth and competition.The other key ­ and equally huge ­ factor that has increased demand for semiconductors has been the advent of the electric vehicle. As more manufacturers are offering them and increasing numbers of houses have a charging facility, technological advancements in terms of batteries and electronics are borne out of this growth. A market emerges that has to feed the modern vehicle with its numerous electronic sensors that monitor automatically temperature, tires, engine performance and more. As automotive companies increase their production levels, semiconductor companies design their technology around the new requirements. With this boost in demand comes a push down on costs, which in turn opens up advanced technologies to a much wider range of industries and applications.The most constrained market everHowever, there are challenges in the semiconductor market that have not been seen before. Supply is considerably constrained with significantly increased lead teams. At the moment, for components that would normally have a 12-week delivery time, with most distribution resources having stock, all of a sudden it's taking a year or more to get them, and even that's not necessarily guaranteed. Increased demand puts pressure on supply chains and can extend lead times during normal times but when the impact over the past two years of the pandemic is introduced, including having to fight with factory shutdowns, the issue has become much more acute. Even now, parts of Shanghai aren't fully open. We've had this period of 18 months to two years where we've not had good consistent production and this has made a big difference to how people plan. Other passive products areas are also seeing these issues, but not the level being experienced with semiconductors. An average lead time can be up to 18 months and businesses are having to rethink planning completely. As a distributor, Farnell would normally do a purchasing review over six months, maybe 12 if carrying out a large exercise, but as standard now, we're looking two years in advance, three with some manufacturers. We're having to manage our pipeline to that level as we look to anticipate demand.Hope for the futureHowever, there is definitely hope for the future, because the experiences of the last two years have generated a greater level of intelligence in the overall market. In the past when there has been periods of allocations in different technologies, people have gone into panic buying. In recent times, people have doubled purchases and then cancelled orders, and there's been a surplus in the market because nobody was really sure what the true level of demand was. It's different now because people have really learned a harsh lesson from those periods. They know it could take a year to acquire a component and they are planning accordingly. There is just a wider intelligence out in the market. Not many can predict what's going to happen in the next 12 months but people are most certainly planning a lot better. Farnell has always been adept at reacting quickly to changes and, through the element14 website, information has been shared across the community, which has helped people to react faster to what's happening in the market. Trying to get that balance right between not having huge amounts of stock and being able to have a rapid reaction to demand is absolutely crucial. Start-up companies in particular need to think hard. Whether it is a 12-month plan of action or a 10-year plan, a lot of thought needs to be put into it, much more than might otherwise be the case. It used to be easy to say these are the parts we can get and this is where our buyers are going to be so we can enter the market. The truth now is that you can't guarantee your time-to-market, you really have to look incredibly closely at your timescales and at what you need to do to get there. Planning and scheduling are now absolutely vital factors for companies operating within the semiconductor industry.
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