EMS production disrupted by passive components shortages

source: Digitimes news

Aaron Lee, Taipei; Willis Ke, DIGITIMES Tuesday 17 April 2018

Increasingly serious shortfalls in the supply of passive components have disrupted production at some major EMS firms in Taiwan, undermining their shipments to brand clients, with consumers facing possible price hikes in the end market.

The sources from the EMS sector said that brand vendors have been informed several times since mid-2017 that passive components will see shortages and pressure for quote hikes will linger through the end of 2018 at least.

If brand clients cannot accept quote hikes, they may face shipment disruption, as EMS firms will naturally give shipment priority to those clients willing to offer better prices, the sources continued.

Usually, large-size brand vendors such as Apple will not have to worry about possible supply shortages of labor and components at EMS partners, as its orders are big enough to secure priority services from the manufacturing partners, the sources indicated. Apple has reportedly even stepped in to sign long-term contracts directly with suppliers of cobalt to help its EMS partners secure stable supply of the material needed to produce lithium cobalt batteries, the sources revealed.

But smaller brand clients with lower procurement capability or major brands’ minor product lines will not receive sufficient support from EMS partners.

For makers of passive components, production disruption at EMS firms serves as the best timing for them to raise quotes on their components.

Once brand vendors accept quote hikes from EMS firms, they will surely reflect the increased costs of components on prices of terminal devices and then inspire end consumers to pay higher bills through marketing packages, according to industry sources.