Navigating Semiconductor Supply Chain Obstacles

Author : Stephen Morris, Rochester Electronics

14 December 2023

Throughout its history, the semiconductor industry has been no stranger to tough situations. Today, obsolescence, counterfeit components and date code concerns are all casting shadows over chip supply chains. In such turbulent waters, having a trusted partner to rely on makes all the difference.

The semiconductor landscape in the upcoming year presents a mixture of acute difficulties and exciting opportunities. The market remains somewhat unpredictable - due to factors like production output uncertainty and geopolitical tensions, alongside continued demand fluctuations. This dynamism shapes the industry's outlook, necessitating adaptability and foresight.

One of the prominent issues is ongoing global supply chain disruptions, including semiconductor shortages and logistic bottlenecks. Such disruptions have underscored the need for resilience and flexibility when it comes to supply management. Businesses have learned the importance of having contingency plans in place to alleviate the pressures they are subject to.

Additionally, the potential for surpluses in specific semiconductor product categories may end up being equally problematic. This could affect pricing dynamics and lead to products flooding the grey market. Consequently, a shift in supply and demand equilibrium may result, potentially impacting businesses' procurement and inventory management strategies.

Furthermore, long lead times could persist for certain critical components, hence affecting the ability of businesses to respond swiftly to market changes. Companies must anticipate these potential delays and plan their procurement and production schedules accordingly to mitigate disruptions.

The semiconductor industry remains highly competitive, and this competition is expected to intensify over the course of the year ahead. As the demand for cutting-edge technology continues to grow, businesses must differentiate themselves through innovation, efficient supply chain management and beneficial strategic partnerships.

Obsolescence: A looming issue
In the fast-paced world of electronics, obsolescence is a constant concern. The rapid progression of innovation means constituent components and materials can become outdated at an alarming rate. When items within the supply chain become obsolete, it can lead to increased costs, supply shortages and (if not dealt with quickly enough) unwanted production delays.

The managing of obsolescence demands the formulation of proactive approach when it comes to the supply chain. Though this does require updates on components that are coming to their end of life (EoL), it must go way beyond that. The monitoring of component lifecycles closely and staying aware of product discontinuation notices (PDNs) is certainly an essential strategic attribute, but things cannot be effectively addressed when the EoL stage has been reached. It should begin right at the design phase, with careful technology selection and the choosing of vendors that are committed to long-term availability. 

Preventative planning that involves various departments within an organisation (such as purchasing, design engineering and program management) can significantly reduce or even eliminate the costs and risks associated with component obsolescence. This is why having advise throughout the journey is so important to electronics equipment manufacturers. The misconception that unauthorised and grey market sources (with all their related risks) are the only viable option once the original manufacturer discontinues a component can thus be dispelled. As we will see, the zero-risk option of a fully authorised supplier should always be the first choice.

Counterfeit components: A perennial risk
Fake components infiltrating the supply chain can pose a significant threat to end user’s production yield and failure rates. Unauthorised testing processes often provide a veneer of confidence that components are accurately tested. However, it should be acknowledged that they typically fall very short of the rigorous standards set by the original manufacturers. To safeguard against the pervasion of counterfeit components, partnering with authorised suppliers is absolutely imperative. 

Date code worries: Age vs. quality
Age, in the form of date codes, can be a source of anxiety when it comes to electronic components. However, it is important to remember that the quality of a product is not solely determined by its date code. Quality depends on numerous different factors, including storage conditions, component management, etc.

In many cases, older components are invaluable for legacy systems and long-term projects. Therefore, while an older date code may raise concerns, it doesn't inherently compromise product quality. What truly matters is how components have been stored and maintained over time. If the components have been stored and managed under tightly controlled conditions, then equipment manufacturers can have confidence in their use. By maintaining the recommended temperature and humidity levels, and employing specialised packaging, older components can retain their quality, integrity and functionality.

Meeting the challenges that lay ahead
To future-proof their product lifecycles, equipment manufacturers need to be prepared. Here are the most prominent aspects where effort must be made:
  •  Strategic inventory management - These businesses need to keep adequate inventory in relation to key components, while still optimising their working capital and avoiding overstocking. Ensuring that they have the right components on hand is paramount if supply channel resilience is to be achieved.
  •  The leveraging of digital tools and analytics - Likewise, such businesses can gain far better supply visibility through the use of advanced analytical platforms. Well-informed, data-driven decisions will be pivotal when responding to a market that is in constant upheaval.
  •    Greater collaboration - Partnering with suppliers who completely understand the industry's dynamics and can offer solutions for long-term product availability and stability will undoubtedly be advantageous. Strong supplier relationships can act as a cornerstone of supply chain success.

Offloading supply chain management functions 
Despite the current challenges, opportunities are also abound. The surplus in specific product categories, coupled with the need for businesses to secure reliable semiconductor shipments, provides companies with the prospect to expand inventory and solidify their supplier relationships. 

By engaging with Rochester Electronics, companies can access an established EoL transition path with risk-free ongoing authorised stock and production capabilities too. As an authorised source for semiconductors from over 70 original manufacturers (including NXP Semiconductors, Texas Instruments, Infineon Technologies and Analog Devices), it offers a comprehensive array of component options. Furthermore, Rochester Electronics has a commitment to stringent testing and quality control procedures rooted in its authorised status - so that customers receive genuine, reliable components and counterfeits are eliminated.

Continuity of supply can be assured via access to parts straight from stock or through accompanying licensed manufacturing resources. Here products that are exactly aligned with the initial manufacturer’s specifications can be recreated, complete with current date codes and the original part numbers.

While the semiconductor landscape may remain unpredictable, it brings with it both challenges and opportunities for businesses. With the right strategies and partnerships, they can get through these uncertain times and position themselves for continued success.

As the sector continues to evolve, Rochester Electronics is ready to support its existing customers and new prospects, offering a multitude of services via which an uninterrupted flow of critical components can be maintained. A commitment to quality, integrity and innovation makes it a valued partner in this respect.

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