Page 3 - EngineerIT August 2022 Digital

FROM THE EDITOR'S DESK

Just in time was just too late for many!

ust-in-time purchasing (JIT purchasing) may be The forecast of the overall 2022 global semiconductor
a great cost accounting purchasing strategy. If revenue has been reduced from the previous quarter’s
Jyou unfamiliar with the concept, it is a systems forecast by $36.7 billion, to $639.2 billion, as economic
approach for developing and operating the purchasing conditions are expected to worsen through the year.
function. You purchase goods so that they’re delivered Memory demand and pricing have softened, especially in
just as they’re needed to meet customer demand. It has consumer-related areas like PCs and smart phones, which
tremendous effects on the operations of production, will help lead the slowdown in growth.
distribution and accounting. With JIT, when you get
customer orders, you plan purchases. You purchase the From an enterprise perspective, inventories are recovering
minimum number of items to meet customer demand. rapidly, lead times are beginning to shorten and prices
JIT purchasing typically results in smaller orders and are starting to weaken. That is a bit of good news for the
frequent deliveries. electronics industry.

As great as the concept is, it also has downfalls. The “Gartner analysts also believe that the semi-conductor
slightest glitch in the procurement channel can create market is entering an industry down cycle, which is not
chaos in a business and seriously affect customer new, and has happened many times before. While the
confidence in your product and manufacturing process. consumer space will slow down, semi-conductor revenue
During the various stages of lockdown of the Covid-19 from the data centre market will remain resilient for
pandemic, many companies experienced this first hand. longer (20% growth in 2022) due to continued cloud
The question arising is: what should be the balance infrastructure investment. In addition, the automotive
between JIT purchasing stock and keeping strategic electronics segment will continue to record double-digit
stock? It is a question I am sure analysts are having growth over the next three years, as semi-conductor
sleepless nights over. content per vehicle will increase due to the transition to
electric and autonomous vehicles. The semi-conductor
Turning to the device shortages, global semi-conductor content per vehicle is projected to increase from $712 in
revenue is projected to grow 7.4% in 2022, down from 2022 to $931 in 2025.
2021 growth of 26.3%, according to the latest forecast
from Gartner. This is down from the previous quarter’s It will most likely be another year before the chaos
forecast of 13.6% growth in 2022. we were thrown into in early 2020 will return to some
predicted normality, albeit a new normality, and that the
“Although chip shortages are abating, the global lessons learnt from the past few years, changing the way
semiconductor market is entering a period of weakness, we design, develop and manufacture, will be more agile!
which will persist through 2023 when semi-conductor
revenue is projected to decline 2.5%,” said Richard Enjoy our August EngineerIT.
Gordon, practice VP at Gartner. “We are already seeing
weakness in semi-conductor end markets, especially Have a great month ahead.
those exposed to consumer spending. Rising inflation,
taxes and interest rates, together with higher energy Hans van de Groenendaal
and fuel costs, are putting pressure on consumer Editor
disposable income. This is affecting spending on Hansv@nowmedia.co.za
electronic products such as PCs and smart phones.” 082 781 4631

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