Professional, research companies, and manufacturers are challenging some of the major manufacturing in the electronics supply chain. Today’s global supply chain is designed to allow buyers identify the perfect trade-off between minimum lead time and lowest price possible.
Professional, research companies, and manufacturers are challenging some of the major manufacturing in the electronics supply chain. Today’s global supply chain is designed to allow buyers identify the perfect trade-off between minimum lead time and lowest price possible. Higher prices may be acceptable if they allow having a higher volume production schedule; alternatively, a longer lead time may be acceptable if this allows saving a few dollars.
Demand for components is increasing in almost every kind of industry – all at the same time, from the automotive, smartphone, medical and IoT markets, which need more and more components for finished products. Sudden changes in the competitive environment can strain supply and distribution chains, causing both struggles on logistics and lead times, and causing slowdowns due to closures or production stoppages of critical suppliers.
In an interview with Jun Chao Sun (JC Sun), Managing Director at Bs&T Frankfurt am Main GmbH, we looked at some aspects of the supply chain, with a particular focus on ferrites.
PEN: Let’s start with the current delivery problems and partial order allocation for semiconductors, as well as soft magnetic materials, e.g. ferrite. Nowadays, delivery times and prices for ferrites, core materials are increasing. Can you give us some information on this, from your experience, and can you tell us how things are going? Why does the current landscape present such a challenge to product manufacturers?
JC Sun: Magnetic is passive and plays an essential role in the market, as well as semiconductors, of course. Both are related: if there is a supply shortage for semiconductors, the magnetic side will also suffer from time dilation.
Ferrites have traditionally been the workhorse of low-cost, low-performance permanent magnet applications. However, their performance can be improved by a variety of approaches. Given the risks of the supply chain, any improvement in the properties of ferrites can enable them to be used in more demanding applications. Such progress can come from materials engineering.
PEN: Is this related to China in particular? Are there other regions affected by this?
JC Sun: Worldwide soft ferrite for power electronics production volume is accounted 500 k MT. Over 90% are from China, there are 250 registered manufacturers in China: there is obviously a clear dependence of material and core supply from China, and it has been for decades.
PEN: What is the current situation in your specific case? How openly do your suppliers communicate the problems?
JC Sun: Bs&T is a specialist in the field of testing and validation of magnetic materials core and coil compliant IEC/IEEE standard, e.g. to ensure the quality sourced from China. During the pandemic, the clients which are usually interested in validation results, have been asking for procurement of device under test, because the supply chain is disturbed, throughout raw material, core and coil. Those are services which are not necessarily in the portfolio. However, we can help those requests with our trading partner in China, who exports commodities from those ferrite manufacturers. As Bs&T has measuring competence on the other side, we do help manufacturers with high purity iron oxide. We have communicated with our clients, suppliers and traders in an open and transparent way.
PEN: What were the production times, for ferrites for example, before the pandemic? And what are the production times today?
JC Sun: The operation in China is in overcapacity, usually 2 to 4 operation time, and transit time through sea freight, it takes 5 weeks, one week less through track. And it takes few days with air freight. The logistic cost is foreseeable. Due to the pandemic, the iron oxide is in shortage: within a quarter, price for iron oxide will be tripled. This significant sharp price volatility, biased with logistic uncertainty (4x price increase within half a year), causes asymmetry in the market. In short, those who have raw materials have the same production time and announce the price increase. This does not happen with those who do not have raw materials in stock.
The sea freight transit time can be doubled to 8-12 weeks, (Suez Canal in March)
PEN: Are there areas of application that haven’t been yet fully affected by the problems with ferrites, core materials etc?
JC Sun: Ferrite designs are dominating the power electronics market. Two major groups are identified: for power application, low losses are required, and for signal or common mode choke, high or moderately high permeability is required. For those high permeable ferrite designs, the technological advantage with nanocrystalline tape wound core can help this application area. Even the nanocrystalline tape wound core price is increasing, but moderately.
PEN: In your opinion, what is driving innovation and investment in the supply chain? Are there big trends that you’re looking at right now in the supply chain from your expertise?
JC Sun: The consequence of this situation is helpful to consolidate the overcapacity situation in China. The next “crisis” is supposed to be related to the measuring competence. Those who do not have standard-compliant measuring systems like Bs&T will have a difficult time.
Another consequence for the ‘European buyer from China’ is that the further dependence from China is migrating into wire-wound component industry, unlike the material and core standard. We are not well-positioned with validation standards for coil and transformer, as well as the DC electrification world.
PEN: Do you see any signs that the situation could ease in the course of this year? And what recommendations do you currently give to your customers?
JC Sun: It will take a while to reach normality. This won’t happen this year but, maybe, by the end of 2022. A crisis is always a chance to sharpen competitiveness.
I can only appeal to winding houses (wire wound component industry) to consider validation of coil and transformer for good sake of the sustainable business, and to Chinese manufacturers to emphasize the necessity of loss measuring system compliant IEC standard like 62044-3, or 63300, the domestic standard GB is not enough for demanding ferrite requirement in Europe.
PEN: What type of work are you currently doing to help the industry get a clearer view of sub-component supply and better manage supply chain risk?
JC Sun: We respect the established standard for material and core, and help to widespread further standards for coil and transformer for the DC electrified world.
PEN: Is greater volatility in the supply of semiconductors/components/material to the automotive industry likely to be a reoccurring issue as vehicles become more connected and electrified?
JC Sun: In Europe, we are good at high power and energy electronics for drive applications, aerospace, automotive, higher Bs ferrite material is needed; and at the same time, higher Curie temperature is needed. This niche application needs a better understanding of the magnetization world electrified by power semiconductors: measuring is indispensable. From a power/energy system performance point of view, “without magnetics, nothing gets done.”