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What impact could CNY 2020 have on UK electronics manufacturing?

14 November 2019

The annual Chinese New Year (CNY) celebration is always a challenging period for any UK electronics manufacturer who relies on imports coming in from the Far East.

While here in the UK it may appear to be business as usual, in China it's the time when all manufacturing projects are put on hold, component manufacturers and distributors shut up shop and shipments in and out of China's ports grind to a halt.

Officially, the Chinese New Year takes place over just seven days - with all major Chinese businesses (including factories) scheduled to cease operations from January 24th to January 30th, and all major businesses in Taiwan closing their doors from January 23rd to January 29th.

In reality though, the effects of CNY are well known to last for as long as five to six weeks. What's more, it's an event that can often require many months of pre-planning to safeguard against the risk of unscheduled delays in production or costly disruptions to the supply chain.

It's not uncommon for Original Equipment Manufacturers (OEMs) to start to feel the effects of production slowdowns as early as a week or two before the CNY holidays even begin - due to the fact that many factory workers choose to leave their jobs at least a week before CNY in order to make the journey back to their home provinces.

There can also often be a rush by factories to try to fulfil their orders prior to the holidays. And when this is combined with the challenges of operating with a dramatically reduced workforce, it can often have a negative impact on product quality.

Post CNY there is then the widely recognised problem of 'workforce turnover', with up to a third of China's assembly line workers (and increasingly too, many of the factories' managers and design engineers) opting not to return to their old positions in favour of new or better job opportunities.

The impact of CNY 2020 on PCB supply
As if all these challenges aren't enough for electronics manufacturers to contend with, UK industry experts are also predicting that CNY 2020 could well be one of the most difficult yet.

One of the main issues, according to leading UK PCB supplier NCAB Group, is the continuing global roll out of the high frequency wireless infrastructure 5G which is placing even greater demand on the supply of PCBs and PCB hardware applications.

The effectiveness of 5G hinges on the processing frequency, data transmission and processing speed of its PCB technology - and on developing the base stations that provide the signal.

As 5G gradually replaces 4G, further infrastructure is going to be needed (including transmission networks, and core network hardware facilities) and with a single 5G base station requiring twice as many PCBs as its 4G predecessor, the pressure on PCB supply is anticipated to be immense.

When you add the CNY period into the mix then there is a strong possibility that the supply of high quality and stable factories within China will be far outstripped by demand - as well as putting even greater pressures on the raw materials suppliers that are supporting these factories.

Tips for managing CNY 2020
So what steps can UK electronics manufacturers take to mitigate against the potentially negative impacts of CNY 2020?

NCAB's recommendations are to make sure you increase lead times ahead of CNY, that you provide clear forecasts to your suppliers to offer greater visibility and that you secure the materials that you need well ahead of time.

And most importantly of all, make sure all PCB orders that coming out of China are placed early in December 2019 to guarantee delivery ahead of the CNY shutdown.

CNY is always a challenge for electronics manufacturers, but as 2020 approaches it is going to be even more important for UK companies to adapt their processes to ensure they protect themselves against the impact of factory closures and capacity issues.

According to the Chinese zodiac, 2020 marks the Year of the Rat - the first of the 12 zodiac animals - and one that signals a period of renewal, new beginnings and new opportunities.

It's perhaps fitting too that the Rat is characterised by the traits of positivity, flexibility and caution - qualities that would certainly serve any electronics manufacturer well as they tackle the challenges of the upcoming Chinese New Year celebrations.


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