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There are plenty of problems to solve in bringing an EV to the market

Friday, November 25, 2022

Significant initiatives being taken by governments worldwide—such as incentives, tax rebates, and subsidies, to name a few—are expected to drive the adoption of electric vehicles (EVs). This, in line with efforts to curb carbon emissions as part of the net zero goal.

According to market analyst firm Precedence Research, the global electric vehicle (EV) market was estimated at $170 billion in 2021 and is expected to reach over $1.1 trillion by 2030, registering a compound annual growth rate (CAGR) of 23.1% during the forecast period. Fueling this growth is the growing investments by key players to electrify their vehicle lineup.

Precedence Research notes that Asia dominated the global EV market in 2021. In fact, China alone accounted for almost half, or 45%, of global EV sales. The market research firm says other countries such as Japan, South Korea, and India are also opportunistic markets amid investments by governments to promote the manufacturing and sale of EVs.

The trend in Southeast Asia, however, is only seen to pick up over the past 12 months, according to Marcus Chen, Vice President of Sales for Asia Pacific, at Fusion Worldwide. Based in Singapore, Chen leads Fusion’s sales team in the region in engaging with customers, finding out what they need, and helping them solve their supply chain issues.

“The trend for EV globally has been picking up significantly, with EV trends in Southeast Asia rising exponentially over the past 12 months,” says Chen. “For example, Singapore aims to develop a greener and more sustainable land transport sector via our country’s vision ‘Green Plan 2030’. A portion of this plan is a strong push to electrify our entire vehicle population— for both public and private transportation, therefore supporting Singapore’s target of 100% clean energy vehicles by the year 2040. This push towards EV has already begun in Singapore, and it is expected to only get stronger as the Southeast Asia region accelerates its continued growth of EVs over the next few years.”

Addressing component supply challenges

New electronics requirements are emerging as the traditional internal combustion engine (ICE) is shifted to an electric system. According to Chen, this transformation requires a huge change in the entire car design.

“As there is a substantial increase in the usage of electronic components to support the electric functions in a vehicle, these traditional ICE parts will no longer be needed in an EV. A single traditional combustion vehicle requires 3,000 to 4,000 multilayer ceramic capacitors (MLCC). However, current EVs will need an average of 12,000 to 18,000 MLCCs for both the vehicle and the battery. That is a six-fold increase in the number of MLCCs needed.” Chen explains. “The costs of ICs and semiconductor parts for EVs are forecasted to jump from $600 to $3000 per EV as well. That is a quintuple increase in the value of electronic components being used. This in turn will exacerbate more demand for semiconductors in the market as the amount of EVs expected to hit the road climbs in the next few years.”

With the continuing issue around component shortages, the EV trend is expected to see challenges along the road, especially from a component sourcing standpoint. In fact, automotive production lines have been shut down over the past year or two because of the lack of components.

And this is where Fusion Worldwide comes in. Headquartered in Boston, Massachusetts in the United States, and with 18 offices throughout the Americas, EMEA, and Asia Pacific regions, Fusion Worldwide is a leading global independent open-market distributor. For more than 20 years, the company has been helping customers solve their supply chain imbalances.

“As an independent open-market distributor, we provide our customers with world-class sourcing services,” says Chen. “One of the biggest challenges that EV manufacturers face in the past 18 months was the insufficiency of semiconductors to complement the rising demand of EVs. At Fusion Worldwide, we help our customers source critical products in the market and within locations in countries or regions that are inaccessible to them. We have fostered relationships with distributors that manufacturers might lack in. These well established relationships, coupled with our advanced sourcing capabilities, help our customers to fill their shortages.”

If there is a particular semiconductor that is halting the production of the entire line and manufacturers need to source it, they could come to Fusion because this is where the company specializes.

“At Fusion Worldwide, we support our customers by finding the necessary products to sustain their production lines,” Chen adds. “We serve a wide range of different market verticals, such as storage, consumer electronics, and telecommunications segments. We have seen that in the past 18 to 24 months, our business in the automotive industry, especially the EV space, has grown rapidly. And one of the biggest reasons why these companies come to us, is our ability to guarantee high quality standards. Both traditional and EV automotive customers are starting to recognize that Fusion are one of the very few suppliers who are able to get them the components they need, in the current market.”

Strengthening capabilities with in-house test service

According to Chen, high quality parts are essential to automotive manufacturers. Few independent distributors have the capabilities to test parts for their customers and ensure that they are 100% authentic.

“At Fusion, we can authenticate and verify any single part a customer requires due to our extensive library of golden samples and in-house quality testing facilities.” says Chen.

Earlier this year, Fusion Worldwide acquired Prosemi, one of the largest electronic component test houses in Singapore, because they recognized that the ability to test components is a critical part of the business and a crucial area upon which their customers rely upon.

“As the semiconductor shortages accelerated through the whole of 2021, the market faced multiple bottlenecks in component testing amongst the few test houses across the world, with turnaround times ranging from 3–4 days to 5–6 weeks,” explains Chen. “We decided to make a strategic business decision to acquire Prosemi to support our in-house testing facilities. This enabled us to complete testing procedures and provide inspection reports to our customers within a single week.”

Chen added that Fusion’s ability to source, test and authenticate parts quickly were some of the key reasons automotive manufacturers were able to relief their shortages.

Mitigating sourcing risks

In the current supply chain landscape, electronic manufacturers are being faced with risks, such as counterfeit components, in their effort to secure components outside of their supply networks.

“One of the risks that we frequently see is testing and authenticating products.” says Chen. “This has been the biggest concern and priority to many of Fusion’s customers throughout the entire component shortage. As the shortage persists, customers may bite the bullet and purchase parts from unverified and unqualified sources, where it is impossible to test if those products are authentic and genuine.”

Chen notes that this is the biggest risk because a single substandard component can negatively affect a manufacturer’s entire electronic product— like damaging multiple circuits in the process and the entire PCB, for instance.

“Fusion strives to help our customers remove this risk completely. That is why we only buy from authentic, qualified, and vetted sources. Furthermore, our in-house capabilities help to ensure parts that come from these sources are fully functional before we ship them to the customer,” Chen says.

Another risk that Fusion Worldwide consistently saw through COVID-19 were the lockdowns. “Whether it be a particular region that was placed under lockdown, or component manufacturers shutting off their entire production lines; supplies are inevitably impacted thus creating a big disruption in the entire market,” says Chen. “There may be light at the end of the tunnel when it comes to lockdowns, but seeing as how the industry has changed over the past two years, I think there is still a long way to go before things return to normal.”

Light at the end of the tunnel?

As markets worldwide transition to a “new normal”, with chip manufacturers expanding their factories and boosting their capacities, the component supply issue is seen to start stabilizing.

“Six to nine months ago, every single component and manufacturer were facing supply issues. However, we are seeing improvements in lead times for several brands and product series. We are still in a transition phase where though there are supply improvements in the market, niche products such as FPGAs, chipsets and automotive-grade products are still severely constrained,” says Chen.

Regarding the automotive industry, Chen notes that the market predicts shortages will only subside by the end of 2023. “From our standpoint, based on the data that we are seeing and what we are hearing from our customers, we think that is relatively accurate. It is probably until the end of 2023 that we can see our supply going back to normal and our shortages easing as compared to how prevalent they are today,” he says.

However, the overall outlook for the semiconductor manufacturing in the ASEAN region next year will be difficult to predict.

“Some industries will not see as big a demand over the past two years, especially in the consumer segment,” Chen says. “The PC segment has been down for a couple of quarters, but there are still some segments that we feel will continue to gain strength – factory automation in the industrial segment, 5G, and IoT connectivity, for instance. Overall, I do foresee prospects for electronics and semiconductors in Southeast Asia to be bright over the next two to three years.”

“When it comes to the automotive segment, there is definitely room for growth. We have seen our customers moving their production for telecommunications and consumer products from China to Southeast Asia, as well as the increase of automobile factories in Thailand and Indonesia. Just consider one of the biggest automotive manufacturers in Southeast Asia, Vietnam’s VinFast. They have shipped their first 5,000 vehicles to the US and are consistently picking up pace. Though there is still work to be done in transitioning Southeast Asia into an EV or vehicle manufacturing hub, I am very excited to see the growth of this region unfold, and steer us into the future of the automotive industry,” Chen concludes.

By: DocMemory
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