How Does Lunar New Year Impact the Global Supply Chain?

When envisioning the Lunar New Year, the image of bright fireworks, red envelopes with gifts of money, and meals shared with family come to mind. What also comes to mind is the time of pause the majority of the Asia Pacific (APAC) region takes to enjoy time away from work to celebrate.

How does this time of celebration factor into the electronic component and hardware supply chain? The world’s largest electronics distributors are located in China, Singapore, and Hong Kong. This means that when the region takes time away from offices, the global supply chain is directly impacted.

The Year of the Dragon Begins

Each year in the lunar calendar has a designated animal derived from Chinese zodiac folklore, and 2024 is the year of the Dragon. The exact dates of the Lunar New Year, also known as Chinese New Year or Spring Festival, shift because they are based on the lunar calendar. This year, the celebrations will take place from February 10–20. During this period, the electronic component industry is bracing itself for the annual lull in production, changes to personnel, and possible fluctuations in quality.

The Impact of Lunar New Year on the Global Supply Chain

The impact of this holiday on electronic component manufacturing and shipping is substantial, as businesses in China, Vietnam, Taiwan, Shenzhen, Singapore, Korea, and Japan are required to shut down for the celebrations.

The risk to quality: One of the biggest effects on the electronic component industry is the risk to quality. As companies prepare for the seven-day pause, there can be a rush to complete orders; as a result, corners may be cut, and essential steps in quality assurance may be missed. 

Personnel changes: When work does resume, it can sometimes take up to a month to return to pre-festival production levels. As many as one-third of workers may use the pause as an opportunity to leave their jobs or opt to stay in their hometowns instead of returning to the cities. This can translate into additional challenges for quality, as new hires take time to onboard. 

Production fluctuations: Shipping costs and order lead times often fluctuate in the weeks leading up to and following the holiday. Before the break, demand is heightened, and there is a rush to ship. After the holiday, workers return to an extensive backlog of orders. As mentioned, those workers may be new and not nearly as trained as their more experienced predecessors. 

Lunar New Year Market Watch

In addition to the possibility of constrained supply stemming from the slowdown in production, many manufacturers are preparing to increase prices following the resumption of business. This only adds to the already heightened demand as customers attempt to place orders before the price hike goes into effect.

Here are a few key commodity groups to watch as the celebrations begin.

RDIMM: Manufacturers are reportedly holding supply until after Lunar New Year, as they anticipate a surge in demand. In addition, pricing is also likely to increase.

DRAM & NAND: Pricing for memory components has steadily escalated since the onset of 2024. Micron, a significant memory manufacturer, is amongst those planning a price increase come March. In addition, the company has postponed all orders until after the holiday.

SSD: End-customer projects have been postponed or delayed leading up to February 10, which led to unpredictable demand in January and early February. However, manufacturers have not paused their plans to increase prices.

Despite Lunar New Year slowing business for the electronic component industry, it does not mean that sourcing and supply management comes to a full stop. Relationships with sourcing partners who have a global presence will be especially important during this time, as purchasing teams will be focused on securing cost savings opportunities amid the planned increases.

Proactively Plan with Fusion Worldwide

As a global company, 24/7 support and communication is guaranteed. We support business with continued updates on demand, project launch timelines, and inventory levels leading up to, during, and following the Lunar New Year. Our operations never pause, allowing us to consistently deliver market intelligence on manufacturers, pricing, product availability, lead times, and more.

Subscribe to the Industry Insider for the latest updates on disruptions to the electronic component supply chain. This bi-weekly report is a collection of direct input from Fusion suppliers and customers on what they see and hear related to changes in the supply/demand balance across the electronics industry. 

Our global team wishes all who celebrate a happy Lunar New Year!