Are parts that keep your line running in the crosshairs for discontinuance? When production re-locates, not all parts make the move. Chip companies will make economically-driven decisions on what parts to support. The result: a wave of end-of-life notifications in your near future.
Like most industries, the last couple of years have been an uphill battle for the semiconductor industry. Geopolitical factors and supply chain disruptions continue to pose outsized risks for the semiconductor manufacturers. In response to unprecedented demand, manufacturers are looking to realign orders with capacity and trim lines with less demand. In other words, now is the time to prepare for a wave of end-of-life notifications.
The creation of new factories is a much-discussed variable for growing future capacity. The expansion and growth of factories, however, does not necessarily portend a strong supply to meet your production lines’ demand in the coming years.
What’s behind the coming end-of-life notifications?
We all know that semiconductor processes are hugely expensive and highly sensitive. With potentially thousands of steps just to make a semiconductor wafer, a finished chip takes up to three months to manufacture. As new production avenues are explored during this time of demand, you might think that spells the end of shortages. But behind the scenes, the reality is that a production shift from one factory to another creates numerous challenges for meeting your supply needs.
First up: getting the new factory up and running — and building the product so that it meets all of the manufacturer’s specifications. That initial production run creates a huge hurdle. Some products can be built, but only at a very low yield, with a very low percentage of parts meeting spec initially. In other cases, it may take significantly longer than planned to make the move into production. Worst case, the process is tweaked to such a high tolerance, and with so many possible variables, that they struggle for years to get the new process functioning the way it should.
The result is that a semiconductor manufacturer will only go through the potential pain of moving production for products that have a future. Older products, or products with low or declining demand, are targets for discontinuance. With that comes the pressure of end-of-life planning.
Preparing for the surge of end-of-life notifications
Facing the realities of unprecedented short-term shortages while taking on long-term planning takes a lot of resources. Preparation for EOLs requires a combination of keeping revenue streams open and lines up and running, while looking for future opportunities to secure the parts you need.
1. Sharpen your situational awareness
Keeping up with the geopolitical climate driving these changes takes a lot of work. The semiconductor shortage is taking up more space on the news cycle, but it’s important to get past the dire market predictions and into actionable insights. Accessing market information from well-connected partners who have decades of industry experience saves time and effort.
2. Strategic information collection
Your data carries a lot of value. With the right market intelligence on anticipated demand, you can price out the range of options in light of the time required for implementation/part lead times, as necessary. It’s particularly important to have a good understanding of the amount of parts made for an EOL. We find that product orders for typical end-of-life notifications only meet 60% of the demand for the part, creating a shortage situation in many cases.
3. Staying one step ahead
Most critically, you need to monitor end-of-life notifications and make sure to set immediate alerts. If you don’t know, you can’t act. And prepare to move quickly. Best-case, a typical EOL notice will provide around 180 days to assess your product needs and make an order. When looking to meet future demand, consider your buying strategies now so that you don’t take a reactive stance and end up with excess on your hands.
The inexorable forces of geopolitical shifts and technology acceleration in 5G, IoT, and automotive demand has forced chip companies to decide which parts to continue to support. When the inevitable end-of-life notifications come, you’ll need to make swift, strategic moves to secure the parts you need. We recommend staying aware of what’s driving the EOLs and bracing for continuous shortages as the expansion of semiconductor manufacturing continues.
Read more