Semiconductor Obsolescence

Semiconductor shortages have plagued the electronic manufacturing companies for the past two years. Early this year the US Commerce Department reported that the worldwide chip shortage will possibly last into 2023. According to the survey report, business reported that the median inventory of semiconductor products has fallen from 40 days in 2019 to less than five days.

Businesses have faced various setbacks and challenges in the past year as they steer through supply chain shortages keeping up with market demand. Increased semiconductor obsolescence is adding to the current supply chain disruptions and becoming an additional challenge electronic manufacturers have to maneuver and mitigate these days.

Why are there more component obsolescence and why it matters?

In the past 7 years, there has been an upward trend in semiconductor supplier mergers and acquisition which have created significant consolidation in the industry. Although global regulations have increased for large semiconductor mergers like, the NVIDIA - Arm merger being blocked by the FTC, smaller semiconductor mergers are increasing globally, according to Accenture.

Supplier mergers and acquisitions, product consolidation, technology innovation and changing government regulations have all contributed to the shorter life cycles of semiconductors. As chips continuously evolve in size, parametric to meet regulation standards and technology demands, suppliers discontinue production of older components at a faster pace and financially prioritize manufacturing the newer chips that the market demands.  

As suppliers navigate this new semiconductor paradigm, they are generating PCN and End-of-life (EOL) notices at a faster rate with less lead time notices. OEMs are finding themselves scrambling to stockpile and purchase discontinued parts in order to meet their production needs. This upward trend is causing additional strain on an already volatile semiconductor supply chain.  

Tracking these industry changes will help you evade the potential challenges caused by such mergers and industry changes. It has become imperative for businesses to build proactive obsolescence management plans in this new semiconductor supply chain eco-system, and to plan for inevitable component obsolescence avoiding costly redesigns.  

How to mitigate EOLs?

Using supply chain risk management tools can help you understand your supplier dependencies and market trends, assisting you in calculating your EOL risks, building obsolescence management strategies, and create operation efficiencies.

These simple practices can help you mitigate EOL situations and avoid any costly redesigns or production delays.

1. Design intelligently, accurately forecast your component life cycles and your procurement needs for entirety of the product life cycle. Design with low-risk parts and avoid the use of parts that are near end-of-life in your design to proactively avoid the threat of component obsolescence.
2. Next focus on multi-sourcing, broadening, and strengthening your sourcing options and AVLs to build flexibility into your designs and production. Proactively identify drop-in replacements for your design to stay ahead of supplier product changes and last time buy notices.
3. Lastly, monitor your supply chain, track and stay ahead of any product changes.

These simple practices can help you mitigate EOL situations and avoid any costly redesigns or production delays.