- Founder and current Chief Product Officer of MacroFab Inc
- The former founder of Dynamic Perception
- The former Co-Founder and Chief Architect of Alert Logic
- Was on the previous MacroFab Engineering Podcast episodes
- Topic today is the Coronavirus or COVID-19 outbreak in China and its impact on the global Electronic Manufacturing Supply Chain
- If you want to know more about the virus itself I suggest going to the CDC website
- ~80% of factories in general are back to work in China, but only about 21% are fully staffed
- PCB Vendors
- Extended holiday, workers at a lot of Chinese plants who went home weren’t allowed to come back for two weeks
- We have lots of production in Taiwan
- Taiwan blocked all entrance to mainland Chinese on the 5th of February, many limits still in place
- This is causing significant delays in engineering time for new PCB orders, as most of our vendors’ engineers went back to mainland China for the holiday, and haven’t been allowed to return
- PCBs going to Taiwan/Vietnam/Malaysia, etc.
- As soon as delays started happening, a lot of companies sent orders over to other Asian companies, of course, this caused a fast building backlog at those companies
- Prices going up in Taiwan, Vietnam, etc
- FR4 is now the real problem
- Even if production wanted to speed up in Taiwan, Vietnam, ect.. they can’t get the raw materials fast enough
- Mechanical / Custom Mfg Materials
- This is the biggest challenge for a lot of our customers
- Plastics and metals made in China are getting delayed by a month or more against the original lead times
- Factories are under-staffed and backed up with big orders
- Right now, most component suppliers are back up and running, even if under-staffed
- Small to mid-size orders won’t be impacted much, but high-volume orders sent direct to the manufacturers are getting longer lead times and higher prices
- Yageo is one of the vendors we’re hearing about, as of late last week pushing lead times out past a year on some bulk orders with price increases as high as 50%
- Vishay also has several plants closed as of Monday
Special thanks to whixr over at Tymkrs for the intro and outro!
About The Hosts
Parker Dillmann is MacroFab's Co-Founder, and Lead ECE with backgrounds in Embedded System Design, and Digital Signal Processing. He got his start in 2005 by hacking Nintendo consoles into portable gaming units. He also runs the blog, longhornengineer.com, where he posts his personal projects, technical guides, and appnotes about board layout design and components. Parker graduated with a BS in Electrical and Computer Engineering from the University of Texas.
Stephen Kraig began his electronics career by building musical oriented circuits in 2003. Stephen is an avid guitar player and, in his down time, manufactures audio electronics including guitar amplifiers, pedals, and pro audio gear. Stephen graduated with a BS in Electrical Engineering from Texas A&M University.
Host 1 00:10
Welcome to the macro FEHB engineering podcast. I'm your guest Chris church.
Host 1 00:14
And we're your hosts Parker Dolman
Host 3 00:16
And Steven Craig.
Host 2 00:18
This is episode 212.
Host 3 00:21
Chris church is the founder and current Chief Product Officer of macro fab Incorporated. He is the former founder of dynamic perception and former co founder and chief architect of alert logic.
Host 2 00:33
So Chris was on the previous macro engineering podcast episode 127 tariff impacts and episode 142 Supply Chain conspiracy securities and I think Misha, which is our current CEO at McAfee was also on it. So it's been actually exactly 70 episodes. Since you were last on the podcast. Chris, what has been going on with your life? Current hobbies? Anything interesting going on? Besides you know, Matt crab stuff?
Host 1 01:03
But do I get to do anything other than macro? Feb?
Host 3 01:06
I was about to say that's like 100%. Right.
Host 1 01:11
So 70 episodes, that's been like a year and a half, right? Yes. Well, yeah, I can do math. Yeah. Yeah, I got a few hobbies. I mean, I still spend a lot of time I like to cook I do the whole like, you know, snout to tail thing. Make your own ingredients, all that stuff. That consumes most of my hobby time. But lately, I have started a couple new projects. I think Parker I showed you some pictures the other day of a turntable restoration. I'm doing I've got this musical mmf nine like triple plinth kind of neat little turntable thing. But I bought it for parts bought the parts it was missing. And now I'm doing a veneer and paint job on it, fixing it all up and making it look real nice. And that was my my first veneer job and my first time using a vacuum press for veneer. So that's going to be looking okay. It looks great in the pictures. Yeah, it always looks better in pictures.
Host 3 02:10
Wait, was this one of those projects where you had to buy the tool such that you could make the other tools such that you could then make the final product? Basically?
Host 2 02:18
Those are the best kinds of projects, then you just keep collecting tools?
Host 1 02:22
Oh, yeah. Well, that single use tools. Exactly, I don't know what I'm going to do with this vacuum press when I'm done. I don't know if I have a lot of veneering in my future, but I probably will least use it one more time. But it did lead to another experiment I have to engage in because the turntable wouldn't quite fit on the shelf I have the shelf has kind of a backing on it, and it blocks the way the cables in the shelf is too skinny. So the motor would just fall off into space if I tried to put it on there. So I need to build a base for it. And you know, my wife and I have been talking about a getting a firepit for the backyard, a little propane one. And once I figured out how much those cost and how cheaply they were made, I was like there's no way I'm spending that kind of money on that that kind of product. So I'll be learning to cast concrete after this. The concrete base will be the next thing for the the the turntable and we'll practice with that and then move on to the bigger fire pit project.
Host 2 03:29
I'm just imagine it's gonna be like another Christmas party at churches house. And everything's gonna be veneer and concrete.
Host 1 03:38
Get this it's like this guy on YouTube, like mod industrial maker or something. And he's making all this stuff out of concrete and wood and resin and LEDs. And I'm sitting there going yeah, I could use a new, you know, coffee table and maybe a bench over here and then my wife's looking at me going you're never gonna do any of this.
Host 3 04:00
You know, I was uh, I'm kind of working on some CNC projects right now and my buddy hit me up and was like, hey, you need a table for your CNC Why don't you do a poured concrete table such that you can have a nice level table and I thought about it for a total of just a few seconds and luckily you know the mind was just like Wait no, this is a terrible
Host 1 04:25
It's all it's all fun and games until you try to get it out of that mold and you're like okay, I need six people to come help me get this thing out because it weighs 800 pounds but that's the that's the problem I'm like you know I want to do the cast concrete thing and you know, they're like oh you need to use this you know glass fiber reinforced concrete and all this I'm like looking at okay, where can I get it only online. Okay, I'm going to need three bags. They are 40 bucks a bag and it's 200 bucks and shipping. Maybe I will just buy that thing I saw premium
Host 2 05:00
Cool. So today's topic is the Coronavirus or CO V ID 19. I think that's the virus strain outbreak in China and its impact on the global electronic manufacturing supply chain. If you want to know more about the virus itself, I suggest going to the CDC website, which is cdc.gov/coronavirus. Because we're not biologists or virologists or doctors, I'm pretty sure none of us have a doctor.
Host 1 05:31
Nobody, no. podcast from time to time.
Host 1 05:37
So, you want to take it away, Chris?
Host 1 05:39
Oh, sure. So, you know, kind of looking at where we are now. You know, obviously, this this virus broke out, you know, the initial outbreak was right before the the New Year's holiday, the Lunar New Year holiday, and really started to take off during the holiday. And what we started seeing right away was the government extended the holiday a little bit. They want people to kind of stay in place and not spread the disease, they started quarantining different cities and areas. And then they, you know, while they did only extend it to, uh, I think to what is it the ninth?
Host 1 06:15
I think they extended it a week. Yeah,
Host 1 06:17
Yeah, they extended by a week. And then but what was happening is they everybody kind of believes, you know, right or wrong. I don't know that the incubation period was two weeks. So the factory started saying, hey, look, even though the, you know, the holiday is going to be over in a week, we don't want to see you back here for two weeks. If you're from any of these regions, we can figure out if you're healthy, and all of that we don't want people coming back here and getting everyone else sick. So a lot of factories just started coming back to work this week. This is really, when, you know, a lot of people could start traveling again. But still a lot of the towns out there, quarantine, especially a lot of the factory workers are coming from Wuhan in that in that province. And so they're still not returning to work. Right now, what I'm looking at is there about 80% of the factories, kind of across the board in China are back up and running. But only about 21% of the total factories out there actually fully staffed at this moment. And of course, that varies on some from, you know, maybe being 10% understaffed to some to being 90% understaffed. And we're gonna hear people like apples and all that saying they're not only other production outputs reduced, their sales are reduced, because, you know, nobody in China is going to the mall and buying iPhones and stuff like that.
Host 2 07:38
Yeah, I can imagine if you don't go to work with all the people there, you wouldn't want to go to a mall either.
Host 1 07:46
No, and then the areas where things are quarantined, really, they're not much not allowed to travel very much right now to get out of the house. They certainly don't want people go into supermarkets and malls and stuff like that. So, you know, what we kind of saw on the way to I mean, there's there's a few other things like we can look at the the shipping behaviors, right, some of the big shippers started sending, you know, canceling ships going back to China, they're actually charging premiums right now, if you want to move into containers back to China, they're charging a premium for it, because they don't know that they'll fill the ship coming back. So it's kind of impacting a lot of different areas there. You know, one of the first stories that kind of came out were companies refusing their oil shipments, you know, that people have these, these companies have these long term oil contracts with oil and gas companies. And they were claiming force majeure under their contracts to cancel q1 shipments. And of course, there's a lot of fighting over that. And what we're seeing, you know, especially for big vendors, metals, stuff like that, we're starting to see a lot of, you know, act of God being claimed in contracts, you know, either to excuse why they're not shipping out their large orders or why they're not buying the materials they contracted to buy,
Host 2 09:02
Try to get out of contracts.
Host 1 09:06
Though, you know, I think when you're looking at kind of where we are right now, you know, we don't, we don't know how much longer this this virus is going to be kind of spreading around. We don't know how much longer some of these towns are in quarantine. But we're definitely not like in a doomsday situation. Right. We're certainly seeing factories going back to work production starting to pick back up. You know, one of the challenges we actually had for us is that we had large PCB orders that were finished in mainland China, right before the holiday started, but they didn't have time to get them shipped out to us. Well, when they got back, they wanted to ship them out. But there was no one to come pick them up. And if there was somebody to come pick them up. There was no one at the shipping station, right to take the order and get it on a plane. And so we're still seeing delayed shipments. It's still happening right now. I mean, we've had a lot of the big airline companies have kind of refused Fly to China right now. And there are a lot of that air shipping capacity you see back, right? You know, sure UPS has some of their planes, FedEx at some of theirs. But a big, big chunk of every cargo hold, and every passenger plane is dedicated to shipments. So we're seeing less capacity for that those airbag shipments coming back to us right now.
Host 2 10:22
Actually, I didn't know that. passenger planes carried cargo like that, I guess it makes sense. Given how big like a 747 would be.
Host 1 10:33
And that's also why they charge you for all the suitcases and all that it's not just the gasoline. Right, there's someone else will pay for that space. But yeah, I think, you know, for us, in particular, and I think for a lot of people in the industry right now, I mean, obviously, if you were, you know, contracted with an EMS company with a factory in China, you're obviously seeing some delays on your orders coming out right now, you know, both with lower capacity, extended time off, and potentially bigger orders ahead of you that they need to get back through. But for us, PCBs have been the biggest problem, the biggest challenge right now. And it's still a moving situation, right? We, you know, we try to we focus on the daily and throughout the day updates from all of our vendors, but they often can't tell us, you know, clear information as well, right. So most of our low volume, actual production happens in Taiwan. And when we have the factory there in Taiwan, they they're fully staffed with the line workers to actually build the fabricated PCBs. But what happened was all of their most of their engineers went back to China to mainland China for the holiday. And then I think it was on the sixth, Taiwan, blocked all entrants from mainland China, back to Taiwan. So now their engineers are stranded, they're stuck back on the mainland, they can't get back to work. So we're seeing pretty significant lead times, mostly in the engineering, the, you know, preparing all the tooling and everything, for getting those orders up and running. And we've been more fortunate than others. But, you know, it's still impacting us pretty heavily. I think we're, we're seeing an average on a low volume order right now, four to five additional days, just for the engineering side of things. But, you know, kind of every time something big like this happens, you know, people respond the exact same way. They say, Okay, well, where is it impacted? Let's move all our stuff there. Right. So they said, Okay, let's move PCB production to Vietnam. Let's move it to Taiwan. Malaysia. Yeah. Any Malaysia anywhere else like that?
Host 2 12:42
That's actually I see a lot of people have been messaging me on like Twitter and in Slack and stuff of like, Where can I get PCBs at? Yeah, and I think actually, Steven, you were you asked me to, if I knew any, besides, like,
Host 3 12:58
We had done a, you know, after, after being delayed for three weeks, that that finally, you know, being delayed for three weeks with an additional unknown amount of time ahead. We started questioning. Okay, so let's, let's see what we can find. Maybe domestic or, or elsewhere. And, and that was one of the biggest things is components are one thing to source outside of China, but it's actually fairly difficult, in my experience to source PCBs outside of China for a reasonable amount of money. You can you can always get them but you but you know, it's some of the quotes we were receiving for, you know, things of low volume all the way up to moderate volume. We're approaching 10x cost. But that could also be because everyone else was also pumping through these other vendors.
Host 2 13:48
Yeah, I would actually say it's probably more of more people are pumping through these vendors, because now everyone that was going through Mainland China is scrambling to try to find an alternative source, and they need their PCBs right away. So probably at the very beginning, they were only playing a little bit more than they would normally pay. And now you're looking at, you know, possibly 10x. If if you're late to the game, so to speak.
Host 1 14:12
Yeah. Yeah, I think I think you guys are spot on there. So you know, I wouldn't say as high as 10x. But, you know, this is the same thing that happened with the Chinese tariffs, right? By the time that you realize you have a problem. Everyone else realizes they have a problem. And if you're making this change after the event, you're already behind the curve, right? So the right time if you want it to be ahead of the whole COVID-19 and getting your PCBs in and getting a great price was before COVID-19 broke out. What happens is everyone tries to shift at the same time the whole herd moves there. And so what we're seeing right now is you know, prices are rising. We're seeing about a tent, you know, from 10 to 30. 80% increases in places like Vietnam, Malaysia, Taiwan, like Unfortunately for us, we're not, we're not seeing those increases in Taiwan, but other people are. We do have negotiated, you know, agreements with our vendors there. But we're seeing the prices are really going up. But everyone kind of forgets one thing, right? You know, where is all the materials coming from, because you gotta think a PCB fabricator takes materials from third parties, you know, some tooling, some machining, little processing, and puts that all together, while they're all buying fr four. Well, therefore, for is primarily made in China, and those factories right now. You know, those factories are understaffed. And so what we're seeing is, if you want more than a small run, you're in a waiting queue for the raw materials to make that we're now seeing the lead times for, you know, just basic fr for material. We're not talking anything special here, you know, your TG 170, or TG 150, you know, high temperature grade
Host 3 16:06
Stuff, glass and blue. Yep. The lead times
Host 1 16:09
Out of China right now for that, that raw material are running, you know, upwards of 12 business days. So, you know, if you're wanting a, you know, 10, day turn, 10, business day turn, you're kind of Sol, right, you can still get a small order, because you're working with someone stock. But for example, you know, we're working on, I think it was like a 10,000 piece order earlier today. And they're like, Yeah, that's a 28 day lead time, like, What are you talking about, that would normally be, you know, a three week lead time for us. So like, well, we got, you know, 18 days of lead time, just on the FR, for material for that. And so we started calling everyone else, and everyone else tells us the exact same thing, right, you know, it's going to be three weeks before I get the material in for that. So you know, it's kind of at this point, it doesn't really matter where you're moving in Asia, the supply chain, is all coming through the same tunnel through through China right now. And so on the larger volume orders, we're gonna see significant delays. You know, obviously, again, if you're getting a mate in Eastern Europe, or the US and you're working out of stock, yet, you probably get a faster lead time, but that price is going to be significantly higher. And, you know, we often get asked by our, our customers, right, why don't we have a whole lot of us vendors in there? Well, it's very simple. When times are good, nobody, you everybody has this sort of price and Lead Time Matrix, this perfect crossing of two things that they're willing to pay, and you offer them this other higher price thing, and they're like, Nah, that's way out of whack. I don't want to do that. Okay. That's why we're not, we didn't put your order in the US because you didn't want to pay us prices to begin with. But then when this hits the like, Okay, I want now what that US vendor, and all of a sudden, it's 30% higher than what they recorded before, or 10x. And I Oh, this is just, you know, this is insane. Why do I do this? Well, the reality is, is you're now going through that same little pipe with everyone else fighting over the same materials, and someone is going to pay it even if it's not you. But, you know, I think, overall, we've been fortunate that, you know, we were really expecting significant delays, and, you know, close to, you know, 70 to 80% of the stuff flowing through our platform, and, you know, it's been more like 10 to 15%, you know, part of that was, you know, as, as the holiday was coming up, you know, we were already baking in some pretty conservative lead times in there. Because we've seen this happen before, where, you know, the vendors get flooded with orders right before the holiday and it takes them a couple of weeks afterwards to catch up. You know, we've we've been partially guilty of that ourselves in the past, maybe even this year, we were we were partially guilty of that, too. For how many more minutes can I put in an order and still get it before the New Year's holiday
Host 2 19:05
We had we had people putting in the order, and then column next day that changed their design still, because they wanted to reserve their spot is what they told us.
Host 1 19:16
That's that's not how this works. But
Host 3 19:21
You know, so So just kind of like a quick little backup that I think is funny. Advanced circuits is an hour east of me right now. I mean, there is a place that is almost a stone's throw that we could get PCBs from and that's where those 10x numbers start coming from, like our standard price. It's like wow, okay. I mean, like, I guess we'll just wait it out.
Host 2 19:45
Well, this goes back to what, what church was saying is that material, so cars from China, so advanced might be like, Okay, we got like half a warehouse full of stuff of materials, right? But that's what we're wanting to get for next couple of months, right? So they end up make that last?
Host 3 20:01
Yeah, yeah, green or green? Which one do you want?
Host 1 20:06
You know, you know it, if I was sitting on that, that stuff, I'd be looking at it telling gas stations do right, you're not, you're not paying at the pump what they paid to fill their tank up with, you're paying what they're gonna pay to refill their tank when it's empty. It's, you know, kind of doing that that forecast future pricing thing. So, and look, if I was in that business, I'd probably be doing the same thing, right, it makes sense, the demand is spiking and peaking, you can help people solve a problem. You don't want people who don't really have a problem and the business need, you know, for tomorrow for those PCBs to be consuming all that supply, you want the the people who really you know, whose business, you know, is going to be made or broken by that next order to be first in line, and therefore, you know, price differentiation is a way to do that.
Host 2 20:57
Another way to think about too, is, if let's say they kept their prices the same, and they got the floodgates went open, and they ran out of their material. Well, now they got layoff everyone that's at their factory. Because now they don't have any work, right?
Host 1 21:12
Nobody wants to do that. Exactly. Yeah. It's someone asked the other day, like on the first article, do you guys just stop the whole line until we're done? You know, reviewing it like, no, do you want to pay to reserve a whole manufacturing line for a week?
Host 1 21:27
We'll do that.
Host 1 21:31
The next job behind these, you know, $30,000 jobs. So you can pay $30,000 and reserve that line?
Host 2 21:37
Can it be we shut the line down? Everyone gets my ties? Right. Exactly.
Host 1 21:45
But yeah, so economic theory aside, right. You know, what we're seeing is sort of typical, you know, supply chain disruption responses, right. We're seeing bottlenecks in the supply chain, we're seeing prices go up, we're seeing lead times go up. We're seeing people kind of shift all around where there is capacity or where there is supply. And that's driving those prices up. There is no easy answer right now on printed circuit boards. And I think Parker, you were talking about seeing that online on Twitter, it seems like every fifth post on printed circuit board on Reddit, where can I get cheap, fast PCBs? That isn't China? Good luck? Probably not, you can get cheap, you can get fast, but you're probably not going to get both right. So there's a lesson in there somewhere about, you know, focusing on all your eggs in one basket somewhere, because it's just that perfect thing when things are going well. But the next, you know, one of the next big areas that we are seeing an issue, you know, it's not quite as impacting as many customers, but it's, you know, it certainly impacts much larger customers of ours, which is around the kind of custom material materials, the plastics, the metals, anything, you know, injection molded stuff like that that's being made in China right now. Kind of kind of get hit with a double whammy, right. So you have this extended delay. And then the problem is, you know, most of us are not the biggest customers in these factories. Right? You know, if it's Apple or you, you're coming second, right? So we've seen now lead times on some of our injection molding and our custom plastic parts, custom metal parts coming out of China, extending by five, six weeks, on top of, you know, the the earlier lead times. So, you know, kind of what that's indicating is, you know, these these vendors, you know, have these other customers, their orders are getting delayed, they're getting moved up earlier, they're shifting stuff from other factories that can't start up, you know, quite as quickly moving that stuff around. And, you know, customers like us and others who maybe are not the number one job going through, they're in the in the queue right now are getting delayed much further than the usual time off would have indicated. And, of course, that's that's having a ripple effect. You know, we're having to delay shipments of components. It's helpful that the PCBs are also getting delayed. So it's not all in one area. But we're seeing that with some of our, our box build or final product customers, that just their materials are stretching out. orders that were placed at the beginning of January are now being you know, that we should have expected mid March are now going to be coming early May. It's just not a not a good place to be. But you know, everyone's revenues impacted. So,
Host 3 24:42
You know, one thing that I'm curious about is How is customer reception of bad news like this? Are you seeing just like in general, people are saying, Hey, I understand or is it kind of like I need my stuff right now. Fix it.
Host 1 24:58
All of the above So
Host 2 25:00
Most of the ones I've talked to are very understanding. Because they see the news on on, you know,
Host 3 25:06
The TV, you're not magazine isn't making this up? No, we're not.
Host 2 25:11
Yeah, exactly. It's very similar to where when, like, Chinese New Year hits, or the and they are like, okay, the stuff that's getting built that is delayed, like, we're not in materials not sitting in our warehouse, and we're just not doing it. Right.
Host 1 25:30
Yeah, that's, you know, that's the same thing. You know, as long as we're responsive, we're on top of it, you know, we're communicating, you know, openly and clearly with our customers, I think that most of them handle it pretty well, obviously, there are, you know, a few that were already in kind of a dire position. They were running, you know, really on the ragged edge of their timelines. And obviously, they needed more than there may be a few out there, you know, who probably just get angry? I don't know, I haven't seen that myself. So I think we've been very fortunate. But again, that's really around that communication part, you know, keeping people updated, we have a daily roster of any particular order that we know is going to be impacted, or we suspect is going to be impacted. And then we reach out directly to that customer, and let them know.
Host 3 26:20
So what's the what's the light at the end of the tunnel? Are we even seeing that
Host 1 26:27
The light at the end of the tunnel is there's going to be a glut of capacity coming online.
Host 2 26:33
When people start returning your emails from like, random Alibaba and Aliexpress inquiries, that's when you know, the light has been reached, you're in the sunlight, when that's happening? Yes, you're all the way mean that there's there's enough people over there that have bandwidth to answer random emails to their factory.
Host 1 26:53
Yeah, so I think. So if we look back at the past, you know, past a year and a half or so, you know, one of the big things I've been hearing from a lot of companies, especially larger companies, we do hear from some of the smaller ones. But some of the larger companies are they were trying to expand back out of China. Right, that tariff concerns that were price price increases that have been going on for a while, I mean, we've seen, you know, the average, you know, since the mid 2000s, the average electronics manufacturing worker in China makes five times what they made back then, right, so the prices have been steadily going up. And so people have been looking to move to new locations, that really happened, you know, enforce, once the, the the tariffs kicked in. And we found they just kind of filled up the factories in Vietnam and Malaysia right 220% capacity very, very quickly. And so a lot of the companies I've been talking to are really looking to expand their footprint a little more globally, you know, maybe looking at Latin America, Africa, Asia, or Eastern Europe, places like that, trying to get out of a single source of in their supply chain. And I think, you know, one of the positive impacts of this will put more effort behind that. It'll cause companies to really think about, you know, do I really want a single source in one country like, this doesn't matter whether it's China or Vietnam, or Mexico or Korea, any one country can have an impact, whether it's a trade issue, or a disease, you know, epidemic like that. It's causing a lot of companies to start thinking about how they can have a more distributed manufacturing footprint. And I think that's better for the economy overall. And I think it's better for those companies, long term viability as well.
Host 2 28:54
So church, what about components like resistors, capacitors, that kind of stuff? Because we know a lot, especially passives. Most of those actually come out of out of China.
Host 1 29:05
Yeah. So this is kind of an interesting thing. So looking forward, we were already expecting I think, you know, longer lead times and higher prices on some of the more popular passives coming in the second half of this year. You know, we just saw, you know, in response to the passive shortage, we saw a lot of new capacity come online, we saw a lot of new supply going out there. And then we saw people not quite picking up on the buying side, like those vendors expected. So we're going to see we already saw that, you know, a trend to move down the production there to go ahead and kind of support those higher prices that those vendors were seeing. Post shortage, right, they they bring on this new capacity, and they're expected to make a certain price point on those components. Don't want that cutting in half, right? That goes back to why they didn't spin up that new capacity to begin with. So we were going to see some pricing pressure and some lead time pressure there. And, in fact, yeah, a lot of these guys are still, you know, if we look at Wuhan, in particular, there are a number of chip plants there. Right? So those, those factories are still shut down right now. You know, we see, you know, for example, yaghi Oh, these guys, they're bringing their plants back online. But their, their orders are stacking up quite huge, right. So they're starting to push out lead times, for some of their bulk orders past the year, they're starting to increase prices. vishay, another passive vendor, there still has some plants closed as of yesterday, or today, it's Tuesday. Yeah, yesterday, they still had some plants not up and running. If you were to ask them, you know, you kind of look at the general supply chain news on that what we're going to see are minimal to moderate delays. But I think for some particular, again, I'm looking at yageo, I'm looking at potentially vishay, these guys that are having a bit of a slower start going on right now, we're going to see, especially on the bulk orders, some significant delays there. But when it comes to, you know, look, if you're building 5000, or 10,000, or something, and you don't need a you know, 500 resistors, you know, each board, you're not really going to see anything right now, because there's plenty of stock in inventories at the distributors, on the shelves, those are already priced in at the price they paid. So it's going to be probably a month or so before we start seeing those prices move in any significant way for the small to mid size producers out there. But I don't expect any major supply chain hiccups right now. But what we will see is the big bulk orders getting delays on those guys.
Host 3 31:58
I think a lot of this boils down to or is a good learning experience for people to understand single sourcing in your designs, and how to avoid that. Or the fact that you should avoid that if possible.
Host 1 32:14
Yeah, I mean, having I think Parker, I remember the story where you know, Becca, DP, him and I, we had this product, and it had this one Opto coupler on it. And this was entirely my fault. I had made a design around this one particular Opto coupler that had a reverse footprint configuration from all the other common Opto couplers. Like it. And,
Host 2 32:38
And it was it was a standard dip for package for an opto two. So it's not like it was weird package, it was just the pinout was funky.
Host 1 32:45
And so, you know, we consumed a good amount, we were probably one of the bigger customers for that particular component. And a broker realized that we had kind of continuous ongoing buys for that. And he went and bought all the stock off the distributor shelves off the market. So every time we go out for production, the only place we could buy it from was him. And by the time we phased that out, we finally design that out of our product, we were paying five times as much as we started for that component.
Host 2 33:16
But it basically got to the point where the you know, the dollar spent for engineering, re engineering to devise to not use that part that was cheaper than running another run with that part.
Host 1 33:31
So I mean, that was clearly a lesson in you know, designing around unique components, single sourcing, all of that, because once you're in that trap, you're you're kind of stuck, right. So I think I'll be honest, I don't have any, like doomsday scenarios here. Right, the supply chain is going to get back up and running soon.
Host 2 33:53
We need our clickbait title, man.
Host 1 33:59
I mean, soon, I would expect within three weeks, everything starts to normalize, we will still see backlogs, you know, at things like you know, for really high volume PCBs, things like you know, the plastics, stuff like that we're going to still see some backlogs as they work through their existing orders. But we're not going to there's nothing yet to indicate that this is the end of the electronics world.
Host 3 34:27
I think people would be screaming a little bit more if there were sides of that.
Host 2 34:32
I'm gonna take that out. That would be the title. This is the end of the electronics industry.
Host 1 34:39
Cut off the first half of the Senate. Exactly. But no, I think right now, I mean, we're just in a position where, you know, China wants to get back to work. They're, you know, working very hard on doing that. This is impacting their economy pretty heavily and they're gonna, you know, they're going to start pushing really hard to get things going Uh, you know, the boards are gonna get built, right, there's going to be some delays throughout February throughout, you know, throughout March for some customers, you know, again, mechanical is gonna take a little bit longer, but I think everything's gonna kind of move back into normal here within by the end of the quarter. And we'll all be forgetting about this next year when lunar new year comes around again. And we're like,
Host 3 35:29
Oh, when the when the Bud Light virus comes out? Exactly.
Host 2 35:32
I was about to say is like, for some reason, the Lunar New Year always surprises people. Like it happens every year. And we let you know, months in advance, and yet people are like, shocked Pikachu face.
Host 1 35:46
Oh, my God, why didn't you tell me? Well, actually,
Host 3 35:50
Actually, our macro Fed does send out in the newsletter, but also via email, you send out notices of things of this sort happening, right?
Host 1 35:59
Yeah, and we put it right in the platform to when we can, you know, when it's big enough that it's going to last for more than a few days. You know, and there's a reason we want to call out why we're adding delays. You know, we'll put that I think we've got a little pop up thing right now on the PCB viewer that says, an additional four days delay. But yeah, I think, I think in general, this is a good exercise for everyone who's doing just in time production, to come in there and try to try to weigh the pros and cons, develop alternative strategies, right? Like, maybe you know, my inventory levels should be zero, before I refill. Maybe I do, you know, I carry a month's worth of inventory.
Host 2 36:48
Or you could have one thing I was thinking about is you can have multiple different build outs, you know, making sure you're not having single sources and stuff like that. But also, when you go out getting quotes, stuff like that for your products, you know, you gotta you gotta be a little flexible with your margin if stuff like this happens. Yeah,
Host 1 37:07
And I think if you run a tight ship, if you're able to then kind of amortize those additional costs across the rest of your production, if you can account for that, looking at it going and saying, Well, you know, I'm gonna make, you know, five or 10% Lower Margin this month, but I'm still going to be shipping to my customers and actually making revenue, you get a little more sanguine about that, if you can go, okay, I can, I can just amortize that across my whole run. Maybe it ends up being point one 5% Lower Margin across the whole, the whole product life. You know, again, we have some people who often can't see things that way. They're like, No, I want it now. And I want it cheap. And I want you to just cut through that line of all these people who want it now and want to cheap and put me up to the front. And you know, but there are a lot of there a lot of different ways to deal with those issues. The big things, you know, I often worry about are some of the startups or the new companies, which are just now, you know, kind of focused on bringing their products to market. Maybe they went to CES, they got a lot of interest.
Host 1 38:14
They gotta get their MVP done. Yeah, they took a lot of backorders, maybe
Host 1 38:20
Something like that. Those are the guys I worry about a little bit right now that they might be the hardest impacted because they had the least slack in their schedule.
Host 2 38:28
And they had the least push because they had the smallest, usually the smallest volumes, right. So they don't have the gravity to get in line, so to speak, or get in front of line. Yeah,
Host 1 38:41
Yeah. I think, you know, some pretty big organizations, right, you know, it's a speed bump, that sucks, you know, impacts their their bottom line, or their revenues for the quarter. But, you know, at the end of the day, it'll, their stock will be backup by the end of the year, and there'll be just fine. So
Host 3 38:59
Yeah, luckily, this isn't happening at the end of q4, and just ruining everyone's year.
Host 2 39:05
So the worst would probably be q3, because that's when everyone is wrapped starting to wrap stuff up and shipping for the holiday season.
Host 3 39:15
That's when everyone's like, Oh, we actually have to do well this year. Yeah,
Host 1 39:19
No, no, I think that's actually when a lot of people are just starting to put in their orders for the holidays.
Host 2 39:24
When that's all I'm saying is if this hit then then you have all those factories shut down where they should be, like max capacity now going crazy. We were little fortunate that this, you know, did happen around the Lunar New Year, so stuff was already shut down. And it's basically like, oh, it's, you know, not to make light of situation, but it's like an extended holiday in terms of from our outside perspective. Or so still shut down?
Host 1 39:51
Yeah, it's like, yeah, I think Lunar New Year was three weeks this year. Right.
Host 1 39:55
Yeah. You know, I
Host 3 39:56
Think I think what a lot of it boils down to is just like a really healthy also realizing that we're all humans, and that some of this can be a little bit fragile. And and you know, the the what turns the screws at the end of the day is humans not necessarily the machines. So like we got to we always have to have a healthy dose of that and understand that it's all it is possible.
Host 1 40:20
Yeah, absolutely. Although I will say some of the brightest minds of our generation are working on making that not true that they want the machines to do it. Oh, for sure. Yeah, we're just not especially in China. Yeah, we're always 10 years away from that, right.
Host 1 40:37
Fusion will happen around the corner.
Host 1 40:39
Right when I get my flying car.
Host 3 40:42
That was supposed to be a long time ago.
Host 1 40:46
Although I can see no Uber, no, they got a they've got helicopters, Uber air. There's some other company I think up in Dallas, they actually have a manned quadcopter.
Host 3 40:59
There's just something so dangerous.
Host 1 41:05
I don't think I think given I think, Parker actually, I think you've also seen me fly a quadcopter. Yeah, like, imagine that in a life size. One would think rotors may just be a path of death and destruction. I'm always surprised when I make it to work in the car without an issue. So
Host 2 41:31
Cool. Do we have any? Oh, we have a article on our blog about this whole situation and how it's impacting the electronics manufacturing world, so to speak. In relationship to macro fab. Is there anything else do we want to talk about?
Host 1 41:48
Well, we're gonna time right. So let's see. Parker has the checker doing.
Host 2 41:54
Oh, the vehicle action thing of Eric talks about that vehicle on this podcast. So I have a 6519 65 checker marathon made by the checker Motor Company in Kalamazoo. And I got it running on Sunday
Host 3 42:13
Running, we're running with really, really big air quotes.
Host 2 42:17
Yeah, so actually, the engine fired up running on this is the first time that engines ever run in at least 32 years. And it moved under its own power into the driveway. It did not stop under its own power, but it ran under its own power. Because it has zero brakes right now because like it doesn't have a master cylinder. So like, the brake pedal just flops around under the dash. So you had to stop it with your feet.
Host 1 42:46
Yeah, this visual image of porker, like try to push the car get out front of the car, try to stop it.
Host 2 42:53
The best thing was, when I first bought this vehicle, I wanted to put it in my backyard and then put a tarp over because I was I basically bought because it was a really good price. And I knew I was gonna get to it right away. So I put it in the back yard. And I had to set up some bricks because I didn't want sitting in the dirt right, pushing it into the backyard. And you got to get some steam up because you got to go from the grass onto the bricks, which is about two inch gap. I pops up onto the bricks. And so then I grabbed the bumper to slow it down. It's almost a 4000 pound vehicle. So 250 pound Parker kind of gets dragged along with it and it goes on the bricks off the brakes into the back fence. Fence had just been replaced from because Harvey blew it down the hurricane hurricane Harvey blew it down so it had just been replaced. Basically, almost put a checker sized hole in a brand new fence. Fortunately, it just like the dirt was wet or soggy. So it just like bent the post. And once I got the checker off of it, I was able to just pull it back and my neighbor doesn't know. Let's see listen to the podcast
Host 1 44:07
Now. You should put some put some veneer or some concrete on that thing. Oh yeah.
Host 2 44:19
Probably talk more about that car in future episodes once I get more stuff done on it. Right.
Host 3 44:23
So it was the Jeep then the wagon, then the checker, all three of which are not done in any way. They never will be right. There's always something more to weld to them. Yes,
Host 1 44:37
It was project. I still think you got to paint it like one of the checker cabs. Yeah. Yeah, get the yellow and the black checkers and all that on there.
Host 2 44:46
So I was going to go the opposite direction and not Black it out. Just matte black it no no that'd be I think it'd be too evil looking for a checker. No, because I was going to do it. Vandy licensed players GONNA DO NOT a check, not a cab. But yeah, I kind of liked the blue a lot. And it was that blue was a special order color from checker. So it's kind of interesting that, you know, there was probably that year, like 10 of those were ever painted that color. That's kind of cool. That's it's that it's called Fairfield blue. It's kind of cool. So probably keep it that color.
Host 1 45:28
Nice so so Parker if I if I were to get a project vehicle, because I can put it in your yard.
Host 3 45:33
As long as you hit the fence. Good.
Host 1 45:35
Yeah, yeah. As long as you mend the fence afterwards.
Host 1 45:41
Well, it depends on which direction I come into the backyard, right? Yes. But go from the neighbor's yard. I'm in the fence. But yeah.
Host 2 45:47
Are you gonna buy that? TVR finally.
Host 1 45:51
So with like a TV or that or what is it the Oh, the triumph? Tr six. That's that's what I want. Oh, one of those. But I have no room for it right now. And no project capacity either. Yeah. Yeah.
Host 3 46:10
You didn't have to veneer that entire
Host 2 46:12
Car. Right? That's actually the thing is the dash would be veneer.
Host 1 46:16
Yeah. The wood dashes. Yeah, well, I'm gonna need a bigger vacuum press.
Host 3 46:21
I was about That's a sexy car. I gotta admit
Host 1 46:25
That Oh, I love those as little little two door you know roadster coupe kind of thing
Host 3 46:31
And just a little sporty thing.
Host 2 46:33
Because because I've sat in one of these before. And my my up my forehead is exposed with the windshield is not tall enough for me that dash is if I drove it, I had to I had to wear driving goggles.
Host 1 46:51
That's a cool, you know, kind of scene to imagine there. You need the driving goggles, the scarf, the gloves.
Host 3 47:00
The whole Red Baron get up. Describing a pistol? Yeah.
Host 1 47:08
Go through the water burger drive through.
Host 1 47:14
Nice, nice. Yeah, so you know, I'm just I'll be honest, I'm kind of back onto the subject though. The podcast, I am looking forward to this being over, you know, getting things getting back to normal. Because, you know, just really distracting everyday, right? Because whether you know, you're in the supply chain team, you're really being held to your on time delivery, your cost targets, you're in the the customer support side, you're dealing with people who are really struggling, because they need their products, they gotta get them out there. And it really does take a lot of energy from everyone to kind of keep on top of this. And you know, really be you know, dealing with all of the challenges on a day to day basis. And when I talk to our vendors in China, and we can actually get a hold of them right now, or Taiwan, right, we're hearing the same things like we really just want things to go back to normal. We enjoy that we're able to make a little more money right now, but it's a lot harder than we normally have to work to do it. And you know, I think once we get back to normal, I think it'll be an opportunity for everybody to catch their breath a little bit and go, Oh, this is so much nicer.
Host 1 48:24
So at that church, you want to sign us out?
Host 1 48:27
Sure. So that was the macro fab engineering podcast. I was your guest Chris church.
Host 1 48:32
And we're your hosts Parker,
Host 3 48:34
Dolman and Steven Craig. Let everyone take it easy.
Transcribed by https://otter.ai