The Real Reasons Component Obsolescence Is Happening Faster Than Ever

Article Highlights:

• Though component obsolescence is broadly accepted as an inevitable aspect of product lifecycles, the 2020s have seen EOL figures reach unprecedented heights.
• One of the strongest forces driving component obsolescence is the accelerating pace of technological advancement. When the world’s leading chipmakers develop new, more sophisticated semiconductor technology, mature chips gradually fall out of fashion, eventually reaching EOL.
• Large-scale disruptions can also trigger obsolescence events. When manufacturers are facing major disruptions, shortages, and other significant stressors on their supply chains, they’ll often lean further into their most profitable products—while shedding parts that aren’t netting the same value.

In the world of electronic components, obsolescence has long served as a persistent risk factor. The specter of a manufacturer sending a production discontinuance notification (PDN) for a specific part consistently looms over production continuity, jeopardizing components, products, and existing designs. 

Though component obsolescence is broadly accepted as an inevitable aspect of product lifecycles, the 2020s have seen EOL figures reach unprecedented heights. In 2021, as the COVID-19 pandemic was transforming supply and demand dynamics for electronics, the market saw nearly 530,000 parts go obsolete. That figure surged even further the following year: in 2022, over 750,000 components were discontinued, a year-over-year jump of almost 50%.

The EOL trends observed during the pandemic have since tapered somewhat: in 2023, approximately 475,000 parts went obsolete, and 2024 figures were similar. But manufacturers are still operating in a landscape in which parts don’t have nearly the longevity that they once did, with components now lasting, on average, somewhere between two and five years before being phased out. 

All of which begs the question: why are components going obsolete so much faster today than they did 10 or 20 years ago? 

To answer this question, we reached out to Bjoern Bartels, the managing director of AMSYS and a renowned expert in obsolescence management (AMSYS is owned by Z2). While some of the factors we discussed have been around for decades, they’ve expanded or accelerated in recent years, propelling a faster obsolescence rate across the industry.

Technological Advancement: Evolutions and Revolutions

Technological Evolution

One of the strongest forces driving component obsolescence is the accelerating pace of technological advancement. When the world’s leading chipmakers develop new, more sophisticated semiconductor technology, mature chips gradually fall out of fashion, eventually reaching EOL. Bartels characterizes this kind of meaningful but incremental advancement—smaller wafer sizes, enhanced power and efficiency—as “technological evolution.” 

Technological Revolution

The second, more drastic way that technology moves forward is through what Bartels calls “technological revolution.” “This is where existing technologies get replaced completely by newer technologies,” he said. He invoked physical media as an example of technological revolution: over the course of around two decades from the late 1980s to the 2000s, society went from VHS to DVDs to Blu-rays, with each successive generation largely supplanting its predecessor. “And today we don’t need these technologies at all anymore, because we stream,” he added.

While technological revolution is less frequent than evolution—especially in the context of electronic components—it does still happen. Transistors replaced vacuum tubes in electronic components, and solid state drives have taken the place of hard disk drives as the predominant storage hardware in electronics. When technological revolutions like these cascade through the electronics supply chain, they often trigger large, if temporary, waves of obsolescence. 

“This is where existing technologies get replaced completely by newer technologies."

Mergers and Acquisitions

Mergers and acquisitions are a relatively common occurrence in the world of chipmakers and component manufacturers. Over the past few years alone, a number of major firms have acquired smaller companies in an effort to broaden their portfolios or boost their competitiveness in specific product categories. 

• In 2022, Advanced Micro Devices (AMD) completed a $49 billion acquisition of Xilinx, a leading manufacturer of programmable logic products, including field-programmable gate arrays (FPGAs) and Systems on a Chip (SoC).
• In 2021, Renesas Electronics bought Dialog Semiconductor for $6 billion. The acquisition gave Renesas an array of products geared toward smart home technology and the automotive industry, including mixed-signal integrated circuits (ICs).
• In 2020, Infineon Technologies acquired Cypress Semiconductor for $10 billion. The acquisition allowed Infineon to expand its memory product portfolio, while also growing its offerings of embedded solutions for the automotive, industrial manufacturing, and smart appliance industries. 

While M&As like these benefit the company completing the acquisition, they also consolidate the broader electronic component market. Following a merger or acquisition, the manufacturer will often work to reduce redundancies and overlapping offerings, primarily carrying out this consolidation by targeting specific parts for obsolescence. These focused retrenchment efforts can serve as a driver for component obsolescence—especially in the immediate aftermath of a major industry acquisition.

Large-Scale Disruptions

When people reflect on how the COVID-19 pandemic impacted the electronics industry and the semiconductors that drive it, they often focus on the combination of surging demand and limited supply. But that formulation overlooks another essential factor, one suggested by the high EOL figures in 2021 and 2022. 

Prioritizing Top Products

When manufacturers are facing major disruptions, shortages, and other significant stressors on their supply chains, they’ll often lean further into their most profitable products—while shedding parts that aren’t netting the same value. It all stems from the scarcity mindset that businesses adopt during tumultuous times, said Bartels. “If rare earths or other materials are harder to get, companies will put these materials into their high-volume, high-margin parts,” he said. “And they will obsolete the ones that are not as profitable.” 

Whether through pandemics, geopolitical conflicts, or natural disasters, when supply chains are stressed and access to key materials is throttled, manufacturers make difficult decisions about how to allocate limited supplies of silicon, germanium, or gallium nitride, to name a few key semiconductor materials. “It strains their business model to the point where they have to say, ‘Okay, these low profit parts are not worth it anymore,’” Bartels said. The downstream effects of these internal decisions is more component obsolescence across the electronics manufacturing market.

“If rare earths or other materials are harder to get, companies will put these materials into their high-volume, high-margin parts."

ESG and Environmental Regulations

The emergence of major environmental regulations over the past few decades has also contributed to the acceleration of component discontinuance. The implementation of the Registration, Evaluation, Authorisation, and Restriction of Chemicals (REACH), the Restriction of Hazardous Substances (RoHS), and the expansion of RoHS (RoHS 2) in 2013 all triggered a temporary increase in obsolescence, as manufacturers shuttered production on older parts that were out of compliance. 

While major environmental regulations don’t enter into force every year, smaller regulatory developments can also send ripples through component manufacturing. Annual additions to the Substances of Very High Concern (SVHC) list, as well as new directives to restrict PFAS are examples of smaller-scale regulatory actions that can drive obsolescence in more modest proportions. “Regulations and regulatory changes make items become obsolete,” Bartels said. 

De-Risking From China Dependencies

As geopolitical tensions have grown between the U.S. and China this decade, a growing contingent of U.S. companies are quietly angling for ways to move their manufacturing out of China. This is hardly a new trend: “de-risking” away from China has been an established supply chain strategy for years now. Less-discussed, however, is how all this China+1 sourcing behavior triggers component obsolescence. 

As Bartels pointed out, small, niche manufacturers in China may produce large quantities of specific parts for just a few American companies. If one of those U.S. original equipment manufacturers (OEMs) decides it no longer wants to source those goods from China, that single sourcing decision can have major ramifications for the Chinese supplier. “That might make up 50% of the total revenue of that fab,” Bartels said, using a hypothetical figure. In order to make up the shortfall, “that fab will just produce other items,” pushing a component whose demand has suddenly plummeted into EOL.

New and Emerging Cybersecurity Requirements

A final variable in the accelerating pace of component obsolescence concerns evolving cybersecurity requirements. Increasingly sophisticated cybercriminal enterprises and their strategic cyberattacks are forcing technology companies to update their software more and more frequently. Developers are now regularly applying patches, implementing new security features, and addressing vulnerabilities to stay one step ahead of global cybercriminals. 

While this proactive approach to cybersecurity no doubt serves the best interest of both individual consumers and enterprise clients, it can pose a challenge for the hardware the software runs on. “Just think—if there’s a specific firmware or software on a hardware component and there’s new cyber threats out there,” Bartels explained, “the software needs to be updated, but the new version might not run on old technologies anymore.” In instances in which updated software no longer runs on older devices, the resulting unaddressed security risks effectively render that hardware obsolete. To drive this point home, Bartels provided a personal example, holding up his iPhone 11. “I have to buy a new one by next year, because support will end next year,” he said. Once the iPhone’s operating system updates are no longer compatible with the device’s 11th generation phone, that product will become functionally obsolete.

"Just think—if there’s a specific firmware or software on a hardware component and there’s new cyber threats out there, the software needs to be updated, but the new version might not run on old technologies anymore.”

Protect Your Company From Component Obsolescence With Z2

While the number of electronic parts that go into obsolescence might fluctuate from one year to the next, the larger trend of diminishing component lifecycles is showing no signs of tapering off. The rapid pace of technological advancements, combined with everything from major acquisitions to large-scale supply chain disruptions, are triggering discontinuance across the electronic manufacturing landscape.

But organizations are not helpless against this rising tide of obsolescence. Resourceful businesses with a commitment to resilience can utilize a supply chain risk management (SCRM) tool to help them effectively navigate EOL risks. SCRM software Z2 offers a strong suite of obsolescence management tools engineered for this very purpose. 

• Lifecycle Forecasting: Z2 helps companies understand the obsolescence timelines for their components with a proprietary lifecycle forecasting algorithm. The SCRM tool’s algorithm uses criteria like market demand, manufacturing sites, and technology roadmaps to arrive at a credible projection of when a part will be obsoleted by its manufacturer. Through 2024, the accuracy of the Z2 lifecycle forecasting tool is north of 90%.

• PCN Management: Z2 has comprehensive product change notification workflow management, including the ability to classify and prioritize PCNs based on urgency. Users can also create custom workflows inside the platform, assigning tasks and responsibilities to different teams and professionals in order to effectively mitigate potential PCN impacts.

• Mergers and Acquisitions: Z2’s research team tracks all mergers and acquisitions for tens of thousands of manufacturers and other suppliers operating in the global electronic supply chain. M&As can be a critical trigger for obsolescence, and Z2’s research team incorporates these events into lifecycle forecasting projections on an ongoing basis, ensuring that our EOL forecasts reflect the latest industry developments.

• Real-Time Market Data: Z2Data’s database features over one billion electronic components, including 1,000+ commodity types. Z2 utilizes artificial intelligence to continuously comb through supplier sites and other credible sources in order to provide real-time data to users on a wide variety of market dynamics and variables, including  price, availability, lead times, and other key metrics. This data is always verified by a human source before being incorporated into the database.

• Obsolescence Management Workflows: With the capabilities provided by AMSYS, Z2 now allows users to implement workflows based on obsolescence risk. Parts determined to be at high risk for discontinuance trigger immediate workflows that utilize cross-functional teams, scenario planning, and executive oversight. 

By utilizing all these features, organizations can make smarter design choices, better understand the lifecycles of their components, and implement strategies for effectively negotiating all their obsolescence challenges. 

To learn more about Z2 and how its obsolescence management capabilities can help your organization manage a challenging EOL landscape, schedule a free trial with one of our product experts.