Sourcing Magazine Connector Q3 update (published September 23rd, 2021)
October 6, 2021
Last year, most of us would not have predicted the wild swings in the electronic components industry that was yet to come, and the connector segment (while usually a trailing indicator) was languishing in slow bookings and unknown forecasts. But WOW, times have changed! Here is a look at current factors & trends affecting the interconnect product segment and tips for staying ahead of the market. Today, top connector manufacturers are enjoying high bookings and strong profits. In fact, recent earning calls from TE & Amphenol were extremely positive, with executives commenting that Y/Y sales grew 35% or more exceeding the high end of their financial guidance.
So, what’s happening to fuel the strong growth in the connector segment specifically.
- Commercial Air is bouncing back in North America, but still a bit choppy globally given Covid variants and lack of widespread vaccinations.
- Medical equipment demand remains high driving a continued need for safety and reliability. More blind mating connectors and push pull technology is emerging (see Amphenol LTW FLOS series, see image 1).
- The severity of supply chain disruptions Worldwide has caused “pre and/or double” ordering in the interconnect commodity category, which usually only occurs in active electronics. (Note: WW semiconductor chip shortage). There are examples of ships being delayed up to 6 weeks due to port closures and labor shortages, air and rail delays given lack of equipment and personnel. A connector manufacturer with a factory in Vietnam was closed in July without notice sending all employees home, shutting down production indefinitely. (According to TTI MarketEYE from a report released Wednesday July 21), as much as 10 percent of the world’s shipping capacity is currently unavailable due to port congestion, lockdowns and other logistics issues. The report comes as shipping traffic at Vietnam’s ports queues up following a coronavirus lockdown implemented last Sunday, and WW 328 ships idling in front of ports from south China to Long Beach CA USA.
- Rocket-ships, Robotics, Drones, 5G IoT all using more surface mount lightweight composite connector materials emerging as durable and efficient.
- Automotive Electronics use and EV continues to accelerate giving rise to technologies such as USB-C, FAKRA, and optical style connectors, with ruggedized “high current” SAE J1772 connectors being used in local parking lots and charging stations. (See image 2).
- Military and Defense spending remains at high levels keeping the strong single digit growth going, and an infrastructure bill is pending that can add to the Industrial and Construction segments growth in 2H, 2021 and into 2022.
- Many suppliers are invoking “force majeure” on contractual clauses and inflationary pricing is likely to continue to move higher for the remainder of 2021.
- Raw materials like resins and precious metals have gotten more scarce causing less than 30-day price notices and sometimes order cancellations or backlog re-pricing.
What this means for buyers of electronic connectors for the remainder of 2021;
Firefighting is the new normal. Phrases like “stuck on a boat or in a container in customs” is a common note on late material line items. So, get a grip on your supply chain and your forecasts because you do not want to be the chokepoint for revenue growth at your company because your suppliers let you down. Order early and often!
Additionally, spend more time with your engineers and product teams making sure multiple sources exist for key the key connectors and cable assemblies. Lastly, increase your communications with your suppliers. Share more information on legacy, core, and new product development bringing them closer to your company’s data and decision making. It’s a WILD RIDE in 2021! #SEATBELTSFASTENED« Back to Press