The Electronics Supply Chain in 2025: Ongoing Challenges and New Developments

Before 2020, electronics procurement looked very different than it does now. For many in the industry, it feels like the time before the pandemic and the years that followed belong to two different eras.

Now that we’ve reached 2025, challenges in the electronics supply chain are still affecting businesses. Global conflicts and the long-term effects of the pandemic are continuing to cause delays and problems.

However, things are slowly starting to improve. There are early signs of recovery, and new opportunities are beginning to appear.

Here’s what our supply chain experts with deep supply chain analytics expect to happen this year, and what that could mean for companies trying to move forward in uncertain times.

8 Supply Chain Predictions for the Electronics Industry in 2025

Based on our research into market changes and supplier behavior, here are eight key trends that are expected to shape component sourcing this year:

Tougher Requirements to Stay in the Supply Chain
Ongoing Component Shortages
The Return of Domestic Manufacturing
Increased Cybersecurity Risks
Growth in AI and Automation
Fluctuating Raw Material Costs
Ongoing Labor Issues
Friendshoring Gains Momentum

1. Tougher Requirements to Stay in the Supply Chain

Over the past five years, including during COVID-19, many suppliers were focused on buying up smaller or struggling companies to grow their product offerings. Even if they weren’t experts in every part, they had enough industry knowledge to keep things moving.

Lately, this trend has changed. More suppliers are now consolidating, mainly due to higher costs and a focus on efficiency. Some of this shift is related to reshoring, but much of it involves specialized operations and the need to increase output.

Now, manufacturers – and even their customers – are buying up successful companies in their supply chain to increase production. While this helps in some ways, it also causes issues, such as overlapping roles or unexpected changes.

New project managers and finance teams at these manufacturers are sometimes making decisions that negatively affect customers, including:

Speeding up the end of certain parts
Ending product lines that don’t bring in large profits
Cutting back on services and staff

These changes affect how distributors work with suppliers and impact the entire supply chain. In one case, a supplier stopped working with a customer because they weren’t bringing in at least $100 million a month – even though the issue wasn’t the distributor’s fault.

A strong distributor relationship can help protect your supply chain in 2025. Having a reliable distributor can give you more options and help you find backup suppliers when needed.

There is one benefit to this shift – manufacturer representatives often have more decision-making power now, and there is less red tape. This means you, your distributor, and the manufacturer can work together more easily to find reliable supply solutions.

2. Ongoing Component Shortages

Today, more products include electronic parts, increasing demand across many industries. Forecasts show that the global electronic component market will grow from $186 billion in 2022 to $329 billion by 2031.

As more items become “smart,” competition for components has increased, especially among industrial and infrastructure businesses. The lingering effects of the pandemic and recent global conflicts, such as in Israel (a major semiconductor producer), have only made things harder.

The reality is that shortages will continue in 2025, even though production has increased and demand has slowed down a bit over the past year.

Suppliers are changing rapidly, sometimes consolidating or becoming large, impersonal companies. This makes it difficult to depend on them. In fact, we’ve seen entire branches shut down with little notice.

This is where having multiple sources for the same component and a trusted distributor can be very helpful. With the right people, systems, and tools, your supply chain – and even your product design – can be adjusted to stay more stable.

3. The Return of Domestic Manufacturing

After years of talk, reshoring is starting to happen in the electronics industry. Offshoring became popular in the 1960s and exploded in the 2000s because labor was cheaper in other countries.

That’s still somewhat true, but today, other factors are being considered. Since COVID, more companies are bringing their electronics production back to the U.S. for several reasons:

Higher operational costs overseas, including tariffs and labor
More risk from political instability, natural disasters, and health issues
Better quality control from local suppliers
Faster response times without delays from time zones or language barriers
Stronger protection of intellectual property in the U.S.

That said, setting up local production is not fast or easy. It takes time to get equipment, build facilities, and hire skilled workers. Even with government support, new factories can take two years to open.

Still, progress is being made. For many businesses, reshoring could make supply chain management smoother in the near future.

4. Increased Cybersecurity Risks

Whether your operations are onshore or offshore, protecting your digital systems and customer information is more important than ever.

The average cost of a cybersecurity attack on a manufacturer is now $4.88 million. A 2023 cyberattack on Clorox, for example, led to losses of up to $356 million. Unfortunately, many electronics manufacturers still aren’t keeping up with cybersecurity best practices.

We’ve seen companies shut down entirely after a cyberattack because they couldn’t process orders or pay their suppliers. This kind of disruption can also hit suppliers.

Here are some ways OEMs are protecting themselves in 2025:

Ensuring that their own systems and their partners’ systems meet strong security standards
Purchasing cybersecurity insurance, which can cover major losses
Hiring third-party experts to try to “ethically hack” their systems to find weaknesses
Making cybersecurity a permanent part of their yearly budget

Cyber threats are serious, but more companies are starting to take the steps needed to protect themselves and their customers.

5. Growth in AI and Automation

When wireless products first appeared in the 1980s, many thought it would be the end of traditional hardware. That didn’t happen – many companies still sell more wire than ever.

Similarly, while AI and automation are growing quickly, they won’t replace everything overnight.

Artificial intelligence is helping businesses process data and predict outcomes more effectively. In procurement, this could mean smarter sourcing and better planning.

But for smaller companies, building AI systems is costly. Many still rely on human expertise to make decisions, especially when flexibility and creativity are needed. Online tools and self-service platforms work for basic orders, but not all business needs can be handled automatically.

Automation can help keep parts in production, and even blockchain – best known for cryptocurrencies – may offer useful tracking in the supply chain.

Still, relationships and personal knowledge remain important. AI may support your work, but it’s not ready to replace your team or your distributor.

6. Fluctuating Raw Material Costs

Component lead times are starting to improve and are getting closer to the levels we saw before 2020. This is a good sign that the supply chain is starting to recover.

However, full recovery is not here yet. Many of the materials used in electronics come from overseas. Copper and fluorinated ethylene propylene (FEP), both used in cables, remain in high demand and can be hard to get.

New technology also adds pressure to the supply of raw materials. For example, new machinery often needs different or more advanced materials. Add ongoing conflicts like the war in Ukraine – which supplies most of the U.S.’s semiconductor-grade neon – and the situation becomes even more uncertain.

Electronics manufacturers will continue to adapt by looking for new suppliers and using alternative materials when possible.

7. Ongoing Labor Issues

Like many other industries, electronics manufacturing is struggling with labor. Skilled workers who left during the pandemic haven’t all come back, and many companies can’t offer enough benefits to attract new ones.

There’s also a long-term loss of knowledge as older workers retire. To make things harder, labor needs change often – sometimes there are too many workers, other times not enough.

Working with a third-party distributor can help ease this problem. It removes the need to constantly hire and lay off staff, allowing you to focus more on growing your business and improving your products.

8. Friendshoring Gains Momentum

Due to tariffs, trade wars, and political uncertainty, relying on just one region for components is risky. While reshoring is one solution, another is friendshoring.

Friendshoring means moving production to countries that are politically stable and have better trade relationships. It’s not just about avoiding problems – it’s about building stronger, more reliable supply chains.

Here are some regions seeing growth in electronics manufacturing:

Southeast Asia – Countries like Vietnam, Malaysia, and Thailand are seeing more investment in semiconductor production.
Mexico – Its location and trade agreements with the U.S. are attracting manufacturers like Foxconn, which is building AI servers there.
India – The government is offering $10 billion in incentives to encourage local electronics production and reduce imports.

Friendshoring has potential, but it also brings challenges. Infrastructure, training, and logistics all need to improve for this strategy to succeed.