Long lead time and increased material prices
Whether we are talking about raw material or LCD panels, glass and IC`s (LCD Drivers),commodity prices have been rising in most sectors worldwide. While we can argue that these price hikes are a temporary phenomenon, many of these increases are expected to stay with us for a while. Consequently, we need to find ways to address these price surges both on the short and medium term—and to do so, first we must understand the root causes.
These price increases have come about due to an imbalance of supply and demand. At the start of the COVID-19 pandemic, demand dropped steeply in many industries due to lockdowns, temporary plant closures, reduced consumer consumption, and general market uncertainty. This situation resulted in a corresponding sudden drop in supply globally, as raw material producers reduced production.
A year later – the demand recovered and took pace much faster than the supply base was able to ramp up production, resulting in supply shortages and allocation. The COVID-19 pandemic was a significant catalyst, speeding up the inevitable but not solely to blame for the current situation. In many commodities and markets, further add-on effects exacerbated the current situation due to geopolitical tensions, trade war, and even natural disasters contributing to production capacity allocation and material shortage.
Under such market conditions it is very difficult to estimate lead time and actual costs because it is very product and market demand dependent. Other factors like energy supply costs and freight charges have surged, not to mention the USD versus TWD exchange ratio that has depreciated about 10% during past 12 months which eroded profitability and therefore also affect the market prices.