Uncertain times ahead: Tariffs and the global procurement of electronic parts in 2019

Kristofor Kelly, President and CEO

February 19th, 2019

Tariffs bring uncertainty to the global electronics trade. What is ahead for global procurement of electronic parts?

2019 is off to a volatile start for electronic components trade, with December’s precipitous drop in U.S. manufacturing easing in January’s numbers. After struggling to meet demand for components throughout 2018, the December drop was particularly impactful. The results of U.S. tariffs on the electronics industry remain uncertain, but here are three areas that we are watching closely.

1. Intellectual property protections

Among the questions that remain unanswered: will tariffs curb improper intellectual property usage? Some experts think that tariffs will create the desired impact. Intellectual property protections are important for a wide variety of reasons, including safety and reliability of electronic resources. However, the imprecise nature of sweeping tariffs has stirred up debate within the industry about the ultimate efficacy of tariffs in the intellectual property realm.

2. OEM Supply chains

Tariffs' impact on OEM supply chains have not proved highly noticeable as of yet. But subtle shifts in OEM supply chains can create bigger impacts as the year goes on. The unknown variables around tariffs are infusing uncertainty into the supply chain, creating pressure on the electronics market to make short-term decisions. This can quickly lead to shortages for critical parts.

Electronic components sourcing is a logistical undertaking. But there is also a relationship component. Supply chains connect not just products, but people. In searching for new supply chain partners, keep this in mind. While the upfront costs of working with a highly legitimate supplier committed to excellence may seem higher, you should also receive above and beyond customer service, 24/7 responsiveness, and access to global networks. Don’t settle for less.

3. Rising risk of counterfeit parts

In times of market uncertainty, the pressure to save costs and meet demands is stronger than ever. Counterfeit items can fall under a wide number of categories, including off-spec parts, used or defective products sold as new, and mislabeled parts.

No matter how minimal the problem may seem, counterfeit products are not worth the risk. Counterfeits compromise reliability, no matter your vertical. And reliability problems ultimately your compromise your reputation.

Ensuring quality electronic components begins with transparency. Work with qualified partners that adhere to robust inspection processes, no matter your vertical. Sourcing electronics requires confidence in relationships. When the pressure is on, this confidence is more important than ever.

Responding to uncertain market conditions—you are not alone

Without further clarification on the tariffs, we can expect more market fluctuations in 2019. At times like this, you need more than just the basics. Creative solutions and excellent customer service are critical. A responsive supplier can provide support when you are looking for new alternatives. Velocity’s commitment to excellence transcends market trends. Learn more today.

 

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" The unknown variables around tariffs are infusing uncertainty into the supply chain, creating pressure on the electronics market to make short-term decisions. This can quickly lead to shortages for critical parts. "

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