On October 8, the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) announced that 26 entities and 3 addresses were added to the Entity List. Among them are 16 Chinese companies and 3 addresses in Hong Kong. The reason cited is that these companies were allegedly involved in procuring U.S.-made electronic components for drones used by Iran-related organizations.
Notably, the Chinese mainland and Hong Kong subsidiaries of major U.S. electronic components distributor Arrow Electronics, Inc. were also added: Arrow China Electronics Trading Co., Ltd. and Arrow Electronics (Hong Kong) Co., Ltd.
l Effective date: Already in effect
l Grace period: In-transit goods must arrive by November 7, otherwise “presumed denial”
l License policy: Presumption of Denial
This means that after November 7, it will be almost impossible to obtain BIS licenses to ship EAR-controlled materials from Arrow China or Hong Kong.
Why Arrow? As a core player in global electronic distribution, Arrow Electronics generated $27.9 billion in revenue in 2024, ranking second globally after Taiwan’s WPG Holdings ($29.3 billion), ahead of Avnet ($25.5 billion) and Future Electronics ($26.8 billion). Its agency lines cover nearly all major components: TI, ADI, NXP, ST, Infineon, Microchip, Qualcomm, Intel, Skyworks, Qorvo, and more.
As one of the top four global electronic component distributors, Arrow drives the market through distribution plus technical services. Its supply chain stability in China has a significant impact on key sectors such as automotive electronics and AI servers.
Supply Chain Impact and Distribution Restructuring
Short-term impact: channel gaps and order shifts
After Arrow China and six other distributors were added to the Entity List, the domestic authorized distribution market lost about 12% of its share. Fortunes Electronics, a long-time TI distributor of critical DSP chips, halted operations, causing supply shortages for downstream manufacturers.
WPG Holdings and Avnet quickly absorbed roughly 60% of the redirected orders, becoming key short-term alternatives. The capital market reacted immediately: Arrow’s U.S. stock fell 3.2% in one day, while WPG’s 2024 revenue surpassed Arrow for the first time, ending the long-standing Western dominance in the distribution market.
Medium-term pain: core chip price increases
Supply restrictions intensified chip shortages in industrial control. Industrial components like Infineon IGBT modules saw short-term price increases of 20%, and industrial MCU spot premiums reached 18%. Structural imbalances in the memory market further emerged: DDR4 production cuts pushed prices up 22.2% within a month, with 16Gb chips surpassing $12. Meanwhile, 80–90% of industrial control and automotive electronics still rely on DDR4, creating a mismatch between legacy demand and new production capacity.
Long-term restructuring: localization and multipolar distribution
Geopolitical pressures are driving global distributors to adjust strategies. Avnet is accelerating local warehouse operations in China. WPG is expanding automotive-grade chip offerings, which will account for 35% of its revenue in 2025.
Asian distributors are also rising. Taiwan’s WT Microelectronics surpassed Arrow in 2024 revenue through subsidiary consolidation. Future Electronics is restructuring to form a dual-engine model by 2026. These moves indicate that the global distribution market is shifting from Western dominance toward multipolar competition.
Chip Risks and Supply Pressure
Following the Entity List additions, supply risks across chip categories have become more pronounced:
Power Management Chips (PMIC, LDO, DC-DC)
Arrow holds the largest share in this category, with over one-third of global spot inventory concentrated in Hong Kong and Shenzhen. Demand from drones, automotive, and industrial sensors is rigid, with replacement cycles exceeding six months. Supply interruptions could cause the most significant price volatility, with day-to-day fluctuations appearing first.
Precision Analog Chips (Op-Amps, ADCs, DACs)
U.S. manufacturers tightly control supply, and export licenses are strict. Industrial customers are reluctant to switch because even small voltage drifts can affect overall system performance. Shortages in this category may last the longest, with prices rising gradually over time rather than in short spikes.
Logic and Interface Chips (Small Logic, Level Shifters, CAN/RS-485)
Though seemingly common, fragmented packaging and large minimum order sizes prevent distributors from holding large inventories. Arrow’s tape-and-reel services meet around 40% of domestic small- and medium-sized customer demand. Small-pitch chips are likely to face shortages first, creating significant risks for production lines.
RF and Wireless Connectivity Chips (Sub-1G, Wi-Fi, BLE)
Demand from drones, surveying, and walkie-talkies has surged, depleting existing stock. Domestic substitutes exist, but RF front-end matching and certification cycles take at least nine months. Combined spot and technical premiums make prices prone to rapid jumps.
Microcontrollers (MCU, MPU)
TI, NXP, and ST agency lines overlap heavily, and Arrow holds over 30% of searchable domestic inventory. Automotive and industrial-grade lead times already exceed 26 weeks. After the buffer period, real shortages may force customers to redesign boards or upgrade solutions.
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Power Devices (MOSFET, IGBT, Drivers)
High unit value and capital requirements limit distributor stock. With Q4 coinciding with industrial power and EV peak seasons, supply is tight. High prices and shortages may occur simultaneously, prompting customers to secure stock at a premium to maintain production.
Overall, risk profiles differ by category: power management and RF chips have high price elasticity, precision analog chips face long-term shortages, small-pitch logic and interface chips will tighten first, and MCUs and power devices may experience outright shortages, affecting downstream production stability and solution execution.
ANDE Electronics: Your Trusted Partner in Electronic Component Sourcing
In this rapidly evolving distribution landscape, reliable access to critical components has become more important than ever. ANDE Electronics provides a stable supply of high-quality electronic components solutions, helping manufacturers and system integrators navigate supply uncertainties. By offering a wide range of specialized chips, ANDE Electronics supports clients in maintaining production continuity, accelerating development cycles, and mitigating the impact of global supply chain disruptions.
In a market shaped by geopolitical shifts and evolving demand, ANDE Electronics stands as a trusted partner for ensuring operational stability and long-term success.
