Rochester Electronics’ technical sales manager, Ken Greenwood, explains how OEMs are reclaiming control of their supply chains by tapping into data and expertise
Though semiconductor supply and demand may have begun normalising, it’s important for OEMs, OCMs and their trusted end-of-life partners to agree new sourcing practices to reduce the risks arising from the lasting consequences of the recent turmoil. Sharing data is the key.
The semiconductor manufacturing flow is complex and thousands of miles long. Processing of raw materials, fabrication and assembly has concentrated in Asia to minimise costs. The pandemic and resulting effects on production timetables and shipping links, exposed the supply chain’s vulnerability.
Political and trade tensions, plus a reassessment of existing supply chain risks, have resulted in large-scale restructuring of the semiconductor investment landscape in favour of North America and Europe. These fab investments must eventually be matched by investments in labour force skills, packaging and semiconductor materials to secure the supply chains.
Customers must reassess their purchasing practices. ‘Minimising prices’ has been replaced by ‘guaranteed supply’ as a purchasing mantra. Safety stocks and multi-sourcing are back in vogue. Customers should also plan for supply disruptions and secure relationships with authorised partners who can provide: risk-free access in times of shortage; a trusted source for long-term needs after obsolescence; and critical intelligence on market trends surrounding fab technologies, packages and production capacities.
The continuous evolution of semiconductor technology has been a constant throughout the last 50-years. OCM investments and resources are focused on the most profitable newer technologies, whilst resources and costs are cut and reallocated by discontinuing older products.
The rising dominance of the networking and communications industries’ market share is radically changing the nature of the business. A limited number of dominant users and high-volume applications dictate the rise and fall of technology nodes, especially at third-party fabs. As product geometries shrink, the demand necessary to keep lines running is enormous. Most industrial, transport, medical and energy applications have insufficient demand to influence supply. In a historic first, even automotive struggled to influence supply lines.
There have been numerous examples where a third-party fab has chosen to close a line, with little or no warning to OCM users. Similarly, external packaging houses are choosing to concentrate on higher-margin products, by ending production of older packages, such as PLCC and small-SOIC.
Component lifecycle predictions, normally derived from OCM data suddenly become invalid when segments of an OCM’s own component supply chain begin to dictate the exit timetable.
While OCMs have committed to a massive programme of new investments, component discontinuations (PDNs) on existing products will be arriving faster and more unexpectedly than ever before.
OEMs should regularly monitor components’ lifecycle status. This means tracking the declared lifecycles through component database tools like z2Data and IHS, but also by tapping into the additional data available through semiconductor lifecycle experts, such as Rochester Electronics.
OEMs previously passed component selection and sourcing responsibility to their tier one and two suppliers. Unfortunately, the severity of the recent supply crisis meant supply problems ultimately ended up at OEMs’ tables.
The crisis has triggered a fundamental reconsideration of how OEMs manage components in their end equipment. Supply resources and component expertise—previously not a key focus—are now being strengthened. OEMs are reclaiming control.
OCMs are also attempting to regain control of the ways their products enter the market. Every supply crisis results in desperate sourcing practices. Unauthorised sources and counterfeiters are ready to take advantage of those desperate businesses. Overall component quality then deteriorates and the OCM’s reputation can be tarnished.
OCMs have redoubled their efforts to limit the flow of components into unauthorised and broker channels. Both surpluses of active and obsolete components are now tightly controlled and released only to a trusted circle of authorised partners. These partners are tasked with ensuring components only flow to OEM and CEM customers. This also limits the chances of components finding their way around trade sanctions.
