Richardson Electronics, Ltd. (RELL): PESTLE Analysis [Nov-2025 Updated]

You're looking at Richardson Electronics, Ltd. (RELL) and wondering how the global macro-environment truly affects its bottom line, especially with all the noise around trade wars and interest rates. Honestly, RELL's specialized components and services are a solid buffer against the general economic slowdown, but don't get complacent. The biggest, most defintely immediate near-term risk is its deep reliance on the volatile global semiconductor cycle and the unpredictable US-China geopolitical stability, so we need to look closer at the Political, Economic, Social, Technological, Legal, and Environmental (PESTLE) forces to see where the real money is made-or lost.

Richardson Electronics, Ltd. (RELL) - PESTLE Analysis: Political factors

You're running a global components and solutions business like Richardson Electronics, Ltd., which means you're defintely operating at the sharp end of geopolitics. The political landscape in 2025 isn't just a backdrop; it's a primary driver of your costs, supply chain risk, and market opportunity. The key takeaway is that US policy is creating a bifurcated market: a highly-subsidized, protected domestic ecosystem, and a volatile, high-tariff international one.

Richardson Electronics, Ltd.'s strategy must pivot to capitalize on the domestic boom while managing the escalating compliance burden and cost volatility tied to Asian sourcing. You have to play both sides, but the domestic side offers the greatest long-term certainty.

US-China trade tensions increase export control complexity for semiconductor equipment sales.

The US-China tech decoupling continues to intensify in 2025, directly impacting Richardson Electronics, Ltd.'s Power and Microwave Technologies (PMT) segment, which saw sales grow by a strong 17.8% in Q4 FY 2025, largely driven by semiconductor wafer fab customers. The US government has significantly tightened export controls, notably through the 2024 Semiconductor Manufacturing Equipment Rule (SME Rule), which restricts China's access to advanced chip technology and manufacturing tools.

This creates a complex compliance environment for Richardson Electronics, Ltd. and its customers. By March 2025, the US administration had escalated its measures by blacklisting over 40 Chinese entities and adding 140 to the Entity List, which forces a constant re-evaluation of who you can sell to and what technology you can export. The political goal is clear: deny China access to cutting-edge chips and tools, but the commercial reality is a massive administrative headache for global suppliers.

• Compliance Risk: Export control rules are becoming more granular, targeting performance metrics like 'total processing performance,' not just chip size.
• Market Shift: US lawmakers are pushing the Chip EQUIP Act, which would bar companies receiving CHIPS Act funding from buying Chinese-made semiconductor equipment for a decade, forcing domestic fabs to use Western-sourced equipment.
• Opportunity: This legislative push favors US-based suppliers like Richardson Electronics, Ltd. for domestic semiconductor manufacturing equipment components.

Defense spending boosts demand for specialized power grid and microwave components.

US defense spending remains a powerful, non-cyclical driver of demand for specialized, high-reliability components, which is a core business for Richardson Electronics, Ltd. The Department of Defense (DoD) budget request for Fiscal Year 2025 totaled approximately $850 billion in discretionary spending. More importantly for a component supplier, the focus is shifting heavily toward advanced hardware and munitions for great-power competition, primarily in the Indo-Pacific theater.

A proposed supplemental defense package of up to $150 billion is overwhelmingly directed toward 'stuff'-new equipment, production capacity, and R&D. This translates into tangible demand for Richardson Electronics, Ltd.'s specialized power tubes, microwave components, and custom display solutions (Canvys segment). The push for missile defense, with an allocation of around $25 billion, and munitions, with about $21 billion, directly increases the serviceable market for high-power, specialized electronic parts that are designed and manufactured in the US.

Shifting global tariff policies complicate international supply chain logistics and costs.

The volatility in global tariff policy is a major cost and logistics risk for any company with a global supply chain, and Richardson Electronics, Ltd. is no exception. As of April 2025, a new US trade policy introduced a 10% baseline tariff on most imports into the US. For Chinese-origin electronic goods, the cumulative tariff rate remains high, reportedly up to 35% when layered with retaliatory and other duties.

Here's the quick math: with the average profit margin for electronic component manufacturers hovering around 3.49%, a sudden 10% to 35% tariff cost on imported components can quickly wipe out profitability and force immediate price increases. This volatility is accelerating the strategic shift toward 'China+many' sourcing models and forcing companies to pay a premium for non-tariffed components from alternative regions like Vietnam and India.

Government incentives push domestic manufacturing, potentially reducing reliance on Asian sourcing.

The US government is actively using massive financial incentives to reshore (bring production back to the US) and 'friend-shore' critical technology manufacturing, which is a net positive for Richardson Electronics, Ltd.'s domestic operations and contract manufacturing expansion. The CHIPS and Science Act is the cornerstone of this effort, appropriating $52.7 billion to support domestic semiconductor research and manufacturing.

This political push is creating a substantial, stable domestic customer base for Richardson Electronics, Ltd.'s Power and Microwave Technologies Group (PMT) and Green Energy Solutions (GES) segments. For example, major CHIPS Act awards were finalized in 2025, including $7.865 billion for Intel and $6.565 billion for TSMC, to build new fabrication plants (fabs) in the US. This influx of capital ensures a decade of high demand for the specialized components, subassemblies, and manufacturing services that Richardson Electronics, Ltd. provides to the semiconductor and clean energy sectors.

Richardson Electronics, Ltd. (RELL) - PESTLE Analysis: Economic factors

You're looking for a clear picture of the economic headwinds and tailwinds Richardson Electronics faces, and honestly, the story is one of strong demand in key markets battling brutal cost inflation and a tough dollar environment. The company closed its fiscal year 2025 with annual net sales of $208.9 million, a solid 6.3% rise, but maintaining that momentum means navigating some serious macro-economic forces.

RELL's financial stability, with $35.9 million in cash as of May 31, 2025, and no outstanding debt on its revolving credit line, gives it a cushion. That's a defintely good starting point, but the external economic factors are putting pressure on gross margins, which stood at 31.0% for the full fiscal year 2025.

Global semiconductor market cycles show volatility, impacting RELL's Semiconductor Manufacturing Equipment (SME) segment revenue.

The semiconductor industry is famously cyclical, but right now, RELL is riding a significant upswing in its Semiconductor Manufacturing Equipment (SME) business, which sits within the Power and Microwave Technologies (PMT) Group. This segment is booming because of the global push for chip independence and new wafer fabrication capacity.

Here's the quick math: sales to semiconductor wafer fab customers surged by a massive 52.2% year-over-year in the first quarter of fiscal year 2026 (ended August 30, 2025). This is a huge growth driver, helping the PMT Group's sales grow by 17.8% in Q4 FY2025 alone. Still, this high growth rate is a double-edged sword; any future slowdown in global capital expenditure (CapEx) for new fabs will hit RELL hard due to the segment's size and inherent market volatility.

High interest rates increase the cost of capital for RELL's customers, slowing large capital equipment purchases.

While the Federal Reserve's rate hikes have made borrowing expensive, the demand for industrial equipment has remained surprisingly robust. U.S. capital expenditures are actually projected to rise by 4.7% in 2025, showing companies are still investing. Plus, U.S. business borrowing for equipment purchases grew 5.7% in October 2025, making 2025 one of the strongest years for equipment demand since 2006.

The risk isn't a complete halt in spending, but a higher cost of capital (the hurdle rate) means RELL's customers-the ones buying expensive, long-life equipment-are scrutinizing projects much more closely. This can translate to longer sales cycles and tougher price negotiations for RELL's high-value engineered solutions.

Persistent inflation in raw materials like copper and specialty metals compresses gross margins.

This is where the economic environment gets particularly painful for a manufacturer like RELL. The cost of key inputs has seen a dramatic spike, largely due to new trade policies. Specifically, the announced 50% tariff on imported copper, effective August 1, 2025, has caused U.S. copper prices to surge. Since copper and specialty metals are critical in the power and microwave components RELL manufactures, this is a direct margin threat.

The gross margin of 31.0% for FY2025 already reflects this pressure. To be fair, RELL has managed to slightly expand its gross margin in Q4 FY2025 to 31.6% through disciplined pricing, but the raw material inflation is a constant fight.

A strong US Dollar (USD) makes RELL's products more expensive for international buyers, hurting sales.

As a global company, RELL is exposed to currency fluctuations. When the US Dollar strengthens, its products become more expensive for international customers paying in Euros, Yen, or other local currencies, potentially hurting sales volume or forcing price cuts abroad. The Dollar Index (DXY), which measures the USD against a basket of major currencies, was trading around 100.16 in November 2025, having strengthened 1.39% over the previous month.

A strong dollar creates an exchange rate headwind for foreign sales, which is a big deal since RELL is a global supplier. The company reported a positive 'other income... including interest income, foreign exchange, and other' of $1.4 million in Q1 FY2026, which shows they are managing currency exposure, but the underlying pricing pressure on international sales remains a constant threat.

Here's the key challenge:

• Makes US-manufactured products less competitive overseas.
• Can reduce the translated value of foreign currency sales back into USD.
• Requires active foreign exchange (FX) hedging to protect margins.

Richardson Electronics, Ltd. (RELL) - PESTLE Analysis: Social factors

You're looking at Richardson Electronics, Ltd. (RELL) and trying to map out the non-market forces that will actually move the needle on their stock price and operational efficiency in 2025. Honestly, the biggest social factors right now aren't about consumer trends; they're about the workforce and corporate citizenship. For a specialized components distributor and manufacturer like RELL, the talent crunch and the unyielding demand for Environmental, Social, and Governance (ESG) transparency are the two most critical near-term risks and opportunities.

Severe shortage of skilled engineers and technicians in the US electronics manufacturing sector.

The talent pipeline in US electronics manufacturing is defintely running dry, and this is a direct constraint on growth for companies like Richardson Electronics. The entire US manufacturing sector is grappling with a severe skills gap, which is not a new problem, but it's intensifying due to reshoring efforts and an aging workforce. Manufacturers reported that attracting and retaining talent was their primary business challenge in the first quarter of 2024, with over 65% citing this issue.

Here's the quick math: the US manufacturing industry could see a net need for as many as 3.8 million jobs between 2024 and 2033, and without significant changes, up to 1.9 million of those positions could go unfilled. For RELL's core Power and Microwave Technologies (PMT) and Green Energy Solutions (GES) segments, this translates to higher labor costs and slower production ramp-ups for new products like wind turbine modules. The semiconductor industry alone, a key customer for RELL, is projected to require over one million additional skilled workers by 2030. It's a seller's market for specialized talent.

Increased customer demand for suppliers with strong Environmental, Social, and Governance (ESG) performance.

ESG is no longer a 'nice-to-have' marketing story; it is a mandatory part of the supply chain due diligence, and it's being driven by both investors and corporate customers. In 2025, customers are demanding full environmental transparency-not just compliance certificates, but material declarations, energy use data, and recycling plans. This is a competitive imperative. Companies that digitize their supply chain data for transparency will win new tenders.

The investment community is also pushing this hard: virtually all companies, 99%, consider ESG criteria in future investments. While 80% of companies have clear long-term targets for environmental emissions, only 60% have similar targets for social and governance factors. Richardson Electronics, with its focus on Green Energy Solutions (GES), is well-positioned to capitalize, but they must ensure their social and governance metrics (like labor practices and supply chain ethics) are just as transparent as their environmental pitch.

Remote and hybrid work models complicate specialized manufacturing and R&D collaboration.

The electronics industry has embraced hybrid work, with 68% of companies adopting these models in 2023. While this helps with talent attraction-especially for software and design engineers-it creates friction in the physical, hands-on world of components and specialized manufacturing. About 54% of electronics R&D teams now operate remotely at least part of the time. The upside is that 77% of industry leaders believe remote work actually boosts innovation.

But here's the complication: you can't remotely test a high-power vacuum tube or physically assemble a complex display solution (Canvys segment). The shift requires significant investment in new tools to bridge the gap between the lab and the cloud. This includes technologies like Augmented Reality (AR) and Virtual Reality (VR) for immersive prototyping and interactive design reviews, which are becoming essential for distributed teams. On the social side, 18% of electronics firms have reported a decline in team cohesion, a risk that needs to be managed with intentional in-person time for critical R&D and manufacturing teams.

Aging infrastructure in the US requires component upgrades, driving long-term demand for power grid solutions.

The state of US infrastructure is a social factor that acts as a powerful, long-term demand driver for Richardson Electronics' high-power components. Decades of under-investment mean the grid is now critically aged: 31% of transmission and 46% of distribution infrastructure is near or beyond its useful life. This is a massive replacement cycle waiting to happen.

Plus, demand is skyrocketing due to electrification, data centers, and industrial growth. US electricity demand is projected to grow at a 2.5% compound annual growth rate (CAGR) through 2035, a five-fold increase over the previous decade. The overall load is expected to increase by 25% by 2030. This is why utilities are forced to spend, with electric utilities planning to invest over $1.1 trillion by 2030 to meet this demand. RELL's Green Energy Solutions (GES) segment is directly benefiting from this, reporting a sales increase of 14.1% in Q4 Fiscal Year 2025, driven by demand for wind turbine modules and electric locomotive battery modules.

Richardson Electronics, Ltd. (RELL) - PESTLE Analysis: Technological factors

The technological landscape presents Richardson Electronics, Ltd. (RELL) with clear, high-growth opportunities, especially as the company pivots from a distributor model to an engineered solutions provider. Your investment thesis should recognize that the company's core competency in high-power, high-frequency components positions it directly in the path of three major, multi-billion-dollar market shifts: wide-bandgap semiconductors, next-generation wireless infrastructure, and the massive build-out of green energy systems.

In Fiscal Year 2025 (FY2025), the company's Power & Microwave Technologies (PMT) segment, which captures most of these trends, generated $137.8 million in revenue, growing at 7% year-over-year. Honestly, this is where the long-term value creation will happen.

Rapid adoption of Silicon Carbide (SiC) and Gallium Nitride (GaN) power semiconductors drives demand for RELL's specialized components.

The shift to Silicon Carbide (SiC) and Gallium Nitride (GaN) wide-bandgap semiconductors is a huge tailwind, because these materials allow for smaller, faster, and more efficient power electronics. RELL benefits directly by distributing and designing-in components that support these high-performance systems, which are critical in electric vehicles, industrial power supplies, and data centers.

The company recently entered a global technology partner agreement with Pakal Technologies, Inc., a silicon power semiconductor innovator, to supply these solutions, ensuring they stay current with this defintely disruptive technology. This focus is already paying off: PMT sales, driven in part by higher demand from semiconductor wafer fab customers, grew by 17.8% in the fourth quarter of FY2025.

5G and nascent 6G network infrastructure build-outs create new opportunities for RF & Microwave products.

The global build-out of 5G and the early research into 6G networks necessitate a massive increase in high-frequency, high-power radio frequency (RF) and microwave components. This is a core market for the PMT segment. The new infrastructure requires specialized power amplifiers, switches, and filters that can handle the higher frequencies and greater power density needed for faster data transmission.

RELL's legacy in high-power vacuum tubes (which still serve niche military and industrial markets) gives them a deep technical bench to handle the high-power, high-reliability demands of new RF and microwave systems. This expertise is why the PMT segment is a key growth driver, even with the shift in underlying technology. The company's backlog at the end of FY2025 was stable at $134.2 million, with PMT being a primary contributor, signaling continued near-term demand.

Growth in green energy (wind, solar, battery storage) requires high-power, high-reliability components.

The Green Energy Solutions (GES) segment is the fastest-growing part of the business, which is no surprise given the global push for decarbonization. This segment's revenue soared by 23.6% in FY2025, reaching $28.7 million. The growth is fueled by high-reliability components for existing and new infrastructure.

For example, a key proprietary product is the patented ULTRA3000 ultracapacitor module, which replaces lead-acid batteries in wind turbine pitch control systems-a critical maintenance item. The company is also aggressively investing in the broader Energy Storage Solutions (ESS) market, which is projected to grow from $25 billion in 2024 to an estimated $114 billion by 2032. This market is huge, and RELL is getting in early.

Obsolescence management for older equipment remains a critical, profitable service line.

While the company is focused on new technologies, the legacy business of supporting older, mission-critical equipment remains a stable, high-margin anchor. This is essentially a long-term service contract wrapped around older technology like power grid tubes and microwave generators. The company is one of the last suppliers for many of these components, giving them significant pricing power.

This service is embedded within the PMT segment, which saw growth in its 'legacy power grid tube product lines' in Q1 FY2026. This capability is also a core part of its value-added model, providing aftermarket technical service and repair through its global infrastructure. This service line provides a valuable counter-cyclical revenue stream, cushioning the business during slower technology adoption cycles.

• Maintain pricing power on legacy parts.
• Leverage global service network for aftermarket repair.
• Fund new technology R&D with stable legacy cash flow.

Finance: Track PMT segment gross margin specifically for legacy product lines to confirm profitability and stability by the next quarterly review.

Richardson Electronics, Ltd. (RELL) - PESTLE Analysis: Legal factors

Strict compliance with US export control regulations (EAR/ITAR) is essential to avoid massive fines.

You need to understand that for a company like Richardson Electronics, Ltd., which manufactures and distributes power grid tubes and engineered solutions for military and scientific markets, US export control is not a suggestion; it's a core operational constraint. The International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations (EAR) govern what products and technical data can be shipped where, and to whom. Violations can trigger severe criminal or civil sanctions and penalties, which could wipe out a significant portion of your annual revenue.

For context, Richardson Electronics, Ltd.'s annual revenue for the fiscal year ended May 31, 2025, was approximately $208.91 million. A major ITAR violation fine, which for other defense-related companies has historically reached $10 million to $20 million, represents a loss of between 4.8% and 9.6% of that annual revenue. That's a huge hit to the bottom line, and it doesn't even count the associated legal fees or the cost of a mandated external compliance monitor. Honestly, the risk is existential.

• Mandate continuous employee training on EAR/ITAR changes.
• Audit all international shipping documentation weekly.
• Verify end-user certificates for all dual-use components.

Global data privacy laws (like GDPR) increase compliance costs for customer and supplier data handling.

Operating in 24 countries means you're playing by 24 sets of data rules, plus a few more. Richardson Electronics, Ltd. explicitly notes in its FY2025 filings that compliance with privacy and data security laws 'complicate our operations and add to our costs.' The European Union's General Data Protection Regulation (GDPR), for example, requires strict controls on the personal data of all EU-based customers and employees, regardless of where the data is processed. This isn't just a European problem; it's a global IT and legal budget problem.

While the exact dollar amount of GDPR compliance is buried within the company's operating expenses-which ran at 31.1% of net sales for the first half of fiscal year 2025-the cost is in the infrastructure. You have to hire chief privacy officers, implement data mapping software, and run constant audits. Plus, if you do get it defintely wrong, a GDPR fine can be up to 4% of global annual revenue. Here's the quick math on that risk:

Increased scrutiny on intellectual property (IP) protection, especially in Asian markets.

Richardson Electronics, Ltd. has invested heavily in its Green Energy Solutions (GES) and engineered products, securing 'several patents' for these new offerings. This IP is the engine of your future growth, but it's constantly under threat, particularly in Asia/Pacific where the company has major operations. The 10-K warns that 'substantial litigation and threats of litigation regarding intellectual property rights exist' in the electronics industry.

The risk isn't just losing market share to counterfeiters; it's the cost of defense. Successful infringement claims against the company could 'significantly increase our operating expenses' by forcing us to pay damages or seek expensive royalty and license arrangements. Protecting your patents in markets like China, South Korea, and Vietnam requires constant legal vigilance and a dedicated budget for enforcement actions-a cost that can quickly balloon into millions of dollars per case, draining capital that should be going into R&D.

New EU regulations on product safety and materials composition (e.g., REACH) require constant product adaptation.

The European Union's Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH) regulation is a moving target that directly impacts Richardson Electronics, Ltd.'s manufacturing and distribution of components, especially those produced in or shipped to its German facilities. REACH requires extensive testing, documentation, and registration for chemicals in your products.

The compliance cost is rising dramatically. Effective November 5, 2025, the revised EU REACH Fee Regulation increases standard fees and charges for large companies by 19.5%. This isn't a fine; it's a permanent, structural increase in the cost of doing business in Europe. This trend forces a constant cycle of product adaptation, material substitution, and supply chain re-qualification, particularly for the Power & Microwave Technologies Group and Canvys segments. The need to implement new requirements like Digital Product Passports (DPPs) for articles, which is a key proposal in the 2025 REACH revision, will further increase your compliance overhead in the near term.

Richardson Electronics, Ltd. (RELL) - PESTLE Analysis: Environmental factors

Customer and investor pressure for demonstrable supply chain carbon footprint reduction.

The pressure to reduce the carbon footprint (Scope 3 emissions) in the electronics supply chain is intense in 2025, even for a distributor and engineered solutions provider like Richardson Electronics, Ltd. While the company has a clear environmental commitment-reducing energy consumption and recycling materials-it has not publicly disclosed its specific Scope 1, 2, or 3 Greenhouse Gas (GHG) emissions data for the 2025 fiscal year. This lack of transparency creates a potential risk for institutional investors who increasingly rely on standardized ESG (Environmental, Social, and Governance) metrics to allocate capital.

The major opportunity for Richardson Electronics is its Green Energy Solutions (GES) business unit. This unit secured two multi-million dollar production contracts for its patented ULTRA3000® ultracapacitor pitch energy modules, which replace lead-acid batteries in wind turbines. This product directly reduces the environmental impact associated with lead-acid batteries, providing a strong, quantifiable positive environmental narrative that counterbalances the lack of detailed corporate emissions reporting. The GES segment's strong performance was a key driver for the consolidated gross margin increase to 31.0% of net sales in Q2 FY2025, up from 28.4% in Q2 FY2024.

Strict adherence to global e-waste directives (WEEE) and hazardous substance restrictions (RoHS).

Operating globally, Richardson Electronics must maintain strict adherence to regulations like the European Union's Waste Electrical and Electronic Equipment (WEEE) Directive and the Restriction of Hazardous Substances (RoHS) Directive. These are not suggestions, but mandatory legal frameworks that carry significant financial risk for non-compliance, particularly in key markets like Germany and the UK where the company has operations.

The complexity and cost of compliance are escalating in 2025. In Germany, which uses the Electrical and Electronic Equipment Act (ElektroG) to implement WEEE, basic annual registration fees are at least €175, plus an additional €141.70 for battery registration. Non-compliance is defintely not an option, as potential fines for WEEE and battery violations can reach up to €100,000 per violation in Germany, alongside sales bans. The UK's WEEE regulations, amended in August 2025, are tightening the framework to ensure all sellers, including those on online marketplaces, meet recycling obligations, which increases the administrative burden and cost of WEEE compliance schemes for all producers.

Increased cost and complexity of sourcing 'conflict-free' minerals for manufacturing components.

The sourcing of 'conflict-free' minerals, specifically the 3TG (tin, tantalum, tungsten, and gold) and increasingly cobalt and mica, remains a complex and costly administrative burden. Richardson Electronics, as both a distributor and manufacturer of electronic components, must comply with the Conflict Minerals Rule (Dodd-Frank Act Section 1502). The company files a Specialized Disclosure Report (Form SD) annually, demonstrating its due diligence.

The challenge is magnified because, as the company notes, most manufacturers cannot provide detailed information on the ultimate source of minerals due to complex and fragmented supply chains. For the products Richardson Electronics manufactures itself, which is more than 50% of what it sells, it works with suppliers to ensure they buy from conflict-free sources, using the Responsible Minerals Initiative (RMI/GeSI) reporting template. The cost here is primarily in administrative overhead, supplier audits, and due diligence software, not just the raw material price.

• Use the Responsible Minerals Initiative (RMI) reporting template for due diligence.
• Manage a dual supply chain: one for resold products (low visibility) and one for manufactured products (high due diligence).
• Commit to conflict-free sourcing for gold, tin, tantalum, and tungsten used in internal manufacturing.

Climate change-related weather events pose a physical risk to global manufacturing and distribution centers.

Physical risks from climate change-like extreme weather events-are no longer theoretical; they are a direct and accelerating threat to the global electronics supply chain that Richardson Electronics operates within. The World Economic Forum reported that total global economic losses from natural catastrophes rose to $162 billion in the first half of 2025, up from $156 billion the previous year.

For the broader semiconductor industry, which is critical to RELL's business, a July 2025 PwC report estimated that 32% of the projected US$1 trillion semiconductor supply could be at risk from climate disruption by 2035, primarily due to drought impacting copper mines. Richardson Electronics' own manufacturing and distribution centers in locations like LaFox, Illinois, Marlborough, Massachusetts, and Donaueschingen, Germany, are exposed to localized risks such as extreme heat, flooding, and severe storms, which can disrupt operations and logistics. The company's strategy to increase its Made-in-USA contract manufacturing helps mitigate some of the geopolitical and overseas climate-related supply chain risks.