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16th December 2021

Chinese New Year 2022 (in a year of Chip Shortages)

What you need to know about Chinese New Year as a product developer 

Chinese New Year (CNY) is a huge celebration that takes place with 20% of the global population celebrating it. Whether or not you are planning on attending or celebrating the event yourself, if you work in manufacturing or product development sectors, chances are you need to be aware of it as early as possible.

When is Chinese New Year 2022?

Chinese New Year starts on the 1st February 2022 falling earlier than last year. This means that there will be a public holiday in China starting from the 31st January. Despite the official holiday lasting seven days in practice the celebrations tend to go on for 16 days. 

What happens in a normal Chinese New Year?

Normally lead times increase around this time, everything from toys to white goods. With that in mind in a normal year you should plan to be affected for over 3 weeks due to the time for employees to travel home and back. In addition many factories shut for a number of weeks. Manufacturing sectors can often see the effects up to 6 weeks afterwards.  

While your business may not be based in China, part of your business process, particularly sourcing components, raw materials, or subassemblies, may take place there or go through it. That’s why taking the largest yearly Chinese celebration into consideration is definitely a smart move.

Understanding the impact of Chinese New Year

While it’s only scheduled to be a one-week long event, it often runs into 3 to 4 weeks of factory shut downtime. During this time, essentially nothing will be going in or out of China, and your components or raw materials are no different.  Many of the goods exported from China travel by boat, the closedown adds pressure to the ports with companies racing to get on a containership before closedown.  There is inevitably a backlog that doesn’t make it. 

CNY is also typically the biggest time for job resignation and relocation. Employees that were previously working for your manufacturer may decide not to return after the celebration. You can’t be certain exactly how many jobs will be left open. Therefore, you won’t know exactly how long your production will be delayed until after the holiday.  

So, like all good strategies, you’ve got to plan for before and after the event. Pre-plan and think about quantities that are needed. Additionally, make sure you think about the potential delays that may occur in the weeks/months following CNY. Remember, you can never be too prepared.

This year is not a normal year in many ways. So, what’s different about 2022? 

Here are just a few reasons CNY will have a greater effect this year if you are a product developer 

  • Chip shortages 
  • Sluggish Supply Chain 
  • Pandemic 

How will Chinese New Year affect chip shortages?

One of the major topics for electronic product developers now is chip shortages. Instead of designing your product and then sourcing parts, as is traditionally the case, these days you need to Design For Availability for the chip shortages. 

Chinese New Year means that the already strained supply chain will be affected even more around this time and in the months afterwards. The supply chain was hit by the perfect UK storm of Covid-19 and Brexit. The UK economy recovered quicker than the demand could be met, causing a backlog and huge repercussions ongoing till this day. In addition, there is a shortage of lorry drivers.

Therefore, your BoM (Bill of Materials) needs to be forecast carefully to ensure you get your goods before your planned launch. You’ll want to speak to your manufacturers, sort logistics and sourcing materials or components as soon as possible. 

The effects of the pandemic on the celebrations 

Whilst many workers typically jump at the opportunity to travel home during Chinese New Year, people last year were being asked not to go to rural locations, and the 14 day isolation rules took most of the pleasure out of the occasion. Which means many will choose to return to work earlier after the official 7-day holiday. This year the Omicron variant is likely to have an effect again although to what extent is anyone’s guess. 

Either way whilst the pandemic may mean less people are travelling, as China has previously acted to discourage movement around the country during its largest celebration, this doesn’t mean things are likely to get up-and-running any sooner. Any uptick in employees returning to work earlier is likely to be outweighed by logistical problems from the pandemic. This can be down to extra checks at borders or quarantining of supplies due to spontaneous outbreaks. In addition, many will be experiencing pandemic fatigue and may be more likely to travel this year if the authorities allow them to do so.    

Strengthening relationships 

Having a good partnership will allow you to gain a better understanding of exactly what they need from you and when, in preparation for CNY. You can also find out what measures they have in place to accommodate the holiday. However, it may be difficult for you to build a relationship right now. That’s because they will have their heads down trying to ensure everything is running smoothly in their preparations. However, this is something for you to keep in mind in preparation for next year’s CNY.   

It is also important to be aware that quality may begin to suffer in the lead up to CNY. This again is where having a strong relationship with your manufacturer will come in handy. Having trust in your supplier to continually deliver excellent quality products will help ease some of the stress that CNY is likely to bring.    

On a side note, if you are in the market for a new Chinese supplier or manufacturer, make sure you ascertain their ability to handle CNY before signing any contracts. You don’t want to end up with a company notorious for going off the grid completely during this time and leaving you in a panic. 

Think Ahead, Plan Ahead, Order Ahead

One of the best ways to start planning ahead for Chinese New Year is by creating a forecast for the months you know will be affected and then a few after.  

  • Forecast as accurately as possible how much product you’re going to need during the time the factories will be closed.   
  • Be able to give your suppliers and manufacturers accurate numbers of what you are going to need so they can plan accordingly.   
  • Consider using a company that has factories in several different countries so CNY isn’t the be-all and end-all for you during this time.  
  • Increase your inventory beforehand so if there are any slip-ups or your shipments don’t make it onto their scheduled ships and vessels, you’re not in deep trouble.   

To give you a clearer image, most shipping containers coming from China to the U.K. can take anywhere between 20-40 days to arrive. In addition, electronic components, for example, can have typical lead times of 3-12 weeks, sometimes 20+ weeks. That’s why planning according to your industry is crucial.  

10 Days pre-shipment

Whether you’re shipping stock to or from China, we advise getting your products to the ports at least 10 days before they’re due to be shipped out.

This is because in the lead up to this holiday period, there is going to be a race to get cargo loaded onto the ships before final shipments. Shipping companies are known for taking advantage of the Chinese New Year. They raise prices and making it into a bit of a bidding war as to who gets their products shipped first. The last thing you want is your cargo to get bumped onto the next departing ship. This may leave your orders delayed by potentially weeks or months.  

Putting quality management in place

Due to employees returning at different times this can place added pressure on those working especially as they get back up to speed with lagging orders. This can naturally result in a drop in product quality compared to the rest of the year. 

Will Brexit and the EU play a role?

We have already seen that panics at the borders can occur at short notice due to the unpredictable nature of Covid-19. For example before Christmas when lorries were left stranded in the UK after the emergence of the Kent strain. So the knockon effect of any supplies through Europe could experience a double whammy. It also leaves those importing goods with less choices to bypass the effects of the Chinese New Year by going to the continent where they may have additional tax implications or experience slower movement of goods. This makes it crucially important that you plan ahead this year.  

On the plus side…

As remote technology continues to soar there are great ways to establish closer relationships with suppliers across the globe including China. Perhaps you can even find small ways to celebrate with them. As the dust settles after Chinese New Year this can be a great time to build more intimate relationships with trusted suppliers, and plan even further ahead for Chinese New Year 2023.   

Related article: Building great supply chains  

Chinese New Year is quickly approaching so if any of your production happens in China, it’s best that you get planning sooner rather than later. If you have any questions about the Chinese New Year impact on suppliers or manufacturers, give us a call on 0115 896 6380.  

What will the Year of the Tiger 2022 mean for you? 

Note our expertise is in electronics not predictions but here’s our take… 

This year is a Water Tiger Year. Tigers are quick which means you better be on your toes for 2022. We’ve certainly been on our toes ourselves, growing the team to 16 to become Elektra Design Team of the Year! Situations could change quickly in 2022 so get ready for the ride. It will be a time of strong emotions with the water element bringing both sensitivity but power too. This is a year which “draws its strength and growth, despite adversity, from dynamism and enthusiasm.” 

Luckily, we are highly versatile ourselves with heaps of enthusiasm. When we get to see great ideas come to life who wouldn’t be ready for next year? 

Talk to Ignys

 

Authorship: This article was written with the knowledge and research of Hannah Ingram and Richard Fletcher. Richard Fletcher has over 20 years’ experience in the electronics industry. Hannah spent 6 years in manufacturing.