EPS News published an article on electronic industry hope for recovery due to 5G with some concerns about MLCC shortage again.
5G remains the electronics industry’s best hope to kickstart a global economy that’s been decimated by Covid-19. Although network rollout is far from uniform across the globe, supply analysts are beginning to form a picture of what the 5G supply chain will look like.
As of March, 5G was live in 24 markets globally, according to GSMA. The group is touting “significant traction” for 5G — 79 operators across a further 39 markets had announced plans to launch commercial 5G services as of January 2020.
GSMA’s 2019 report didn’t break out a firm figure for markets where 5G is live but dubbed the tech “a reality” after commercial launches in the U.S. and South Korea toward the end of 2018, reported TechCrunch. GSMA also said it had expected 16 more major countries to have launched 5G networks by the end of 2019.
The coronavirus and politics have hampered 5G’s progress so far in 2020. “Many of our EMS customers that are trying to build out 5G have seen various delays in the global rollout,” said Steve Flagg, CEO and founder of Supplyframe, a supply chain intelligence software company. Flagg cited recent developments in the UK, which – under pressure from the U.S. — has banned global telecom leader Huawei Technologies from its 5G networks.
“Providers say the move will cost them delays and billions of dollars,” Flagg added.
MLCCs scarce — again
Although Covid has depressed demand for parts, there are already indications that the supply chain is facing imbalance. “In terms of specifics, MLCCs are at risk for another shortage at the handset level,” said Flagg. “That’s the primary consumer of MLCCs and as handsets start to roll out everybody fears that is coming.”
MLCCs were scarce for a two-year period beginning late in 2017. Passives component makers were set to add capacity for small-package MLCCs once supply and demand caught up. However, the global electronics market remained uncertain as the U.S. and China engaged in a trade war; manufacturers held off on capital investment; and then the coronavirus hit. That capacity largely has not come online.
“After the major MLCC shortage in 2018, speculation has been growing that there will be another shortage this year partly due to the next generation of smartphones and automobiles,” according to Fusion Worldwide, a hybrid electronic components distributor.
There is also fear of a shortage around HDI PCBs, said Flagg. “We are seeing that now and anticipating over the next couple of quarters that disruptions will abate and production will ramp up.”
Due to the global shutdown caused by the coronavirus, there is currently an adequate level of inventory according to Fusion . But, as production restarts, chip makers are prioritizing components that support 5G technologies. Thus, backlogs are expected, which are expected to produce some level of supply tension along the way.
Work-from-home practices stemming from Covid-19 have accelerated a wakeup call in 5G, said Flagg. “There is considerable stress on the network infrastructure and the promise of 5G is 10 times the performance of 4G.”
“From FPGA and active ICs to passive and transformers, the 5G network has brought about a re-generation of components to meet the specification required,” said Tony Leong, Fusion’s director of business development, Asia.
“With the ramp up in production of 5G components and products, we are expecting added pressure on existing MLCC supply, as well as an increase in pricing for these components,” Leong added.
Current market forecasts call for 1.4 billion smartphones to ship worldwide. If shipments exceed just slightly to 1.5 billion units, this would represent a demand increase of MLCCs amounting to 120 billion units. Once demand picks up, shortages will be wider spread moving forward.
An IHS Markit report shows that the global 5G value chain will enable $13.2 trillion in economic output by 2035 and the investment of $235 billion annually on average to the expansion and strengthening of 5G networks and infrastructure. This will have a downstream effect on semiconductor sales for years to come and will result in a new level of market growth for the industry, said Leong.