Purchasers need strategic management to manage obsolete components

Despite the always existing problem of obsolete components, increasing manufacturers including OEMs, EMSs or distributors become attentive to the issue due to the continuous technology innovation and the resulting faster-than-before parts replacement.

 

Obsolescence problem prevails in a variety of industries, especially in shorter-lifecycle consumer electronics. “We have seen product life cycles, particularly in the consumer marketplace, continue to shorten, so manufacturers are obsoleting their parts at a faster rate than before to keep up with the pace of technology demand in the marketplace," said Kristie Syndikus, director, supply chain management at Celestica, an electronics manufacturing services provider (EMS), based in Toronto. And these changes have had a "cascading affect, impacting component manufacturers as well,” she added.

 

Undoubtedly, electronic components upgrading indeed plays an important role in developing new equipments and increase products’ functionality. However, for such special and worthy industries as defense, aerospace and medical equipment, long lifecycles to outlast the life spans of the semiconductor are critical to the original systems, which shows more urgent requirement for handling with the component obsolescence.

 

Facing the potential risks brought by products outdating, buyers tends to make lifetime buys of parts that are going end of life (EOL) or by have a die banking arrangement with a supplier or distributor. If possible, they will sometimes qualify another source for parts. Meanwhile, buyers’ proactive strategy also works.

 

 

In order to prevent the risk of redesigning product, ending production line, and accessing counterfeit parts caused by components obsolescence, buyers usually need to take proactive approach and work closely with providers to get a better idea when a critical part will be going EOL.

 

A recent analysis of data concerning counterfeit parts by researcher IHS found that 57% of all counterfeit part incidents over a 10-year period involved obsolete parts. Counterfeiters target obsolete parts because they know the parts are scarce and there is still demand for them.

 

As it is part manufacturer that signs EOL, so closely connection with component suppliers is a convenient, accurate and easy avenue. “What is key for us is having very strong supplier relationships with suppliers and ongoing discussions on product lifecycles,” said Linda Diffley, head of tactical supply management at Alcatel-Lucent.

 

 

Since the lifecycle of electronic parts move growingly short, the pre-estimation to the possible component obsolescence becomes very important to designers and procurement staff.

 

To get the anticipated lifecycles of products, the EOL date, and methods to deal with the problem or look for alternatives, buyers should make forecast as early as possible.

 

Lucent-Alcatel operates well in this respect. It provides suppliers with a minimum of 12 months of forecast from direct manufacturing sites and EMS providers on a weekly basis. In addition, Alcatel-Lucent owns component engineering expertise within its procurement team and on product teams that “focus on product lifecycles down to the component level”, said Diffley.

 

As such, Lucent-Alcatel can always make a rapid response to take measures to guarantee continuity of supply when a supplier decides to stop making a part.

Diffley added that in some instances, a board within a system may have to be re-qualified to accommodate new part that replaces an obsolete one.

 

 

For standard part, there are often other providers or alternative products that can be available. But for the biggest challenge-customer parts, such as ASICs and FPCA, it usually costs more time and money as well as attention.

 

Custom components are products for which OEM customers show very costly and lengthy qualification requirements, such as lifetime buys or die banking. With die banking, a semiconductor manufacturer will make wafers for a customer and the wafers will be stored in a temperature controlled environment either by the manufacturer or distributor.

 

Generally speaking, “an ASIC or FPGA for a smart phone may go obsolete much faster than ASIC that is going into an aerospace application,” said Syndikus.

 

 

Despite the accurate tracking information from component manufacturers, along with the prior prediction, buyers can not ensure to access all needed obsolete parts, so they have to search the open market or look for parts on online component exchanges, which creates an opportunity for counterfeit components, especially integrated circuits.

 

Rory King, global director, design and supply chain for researcher IHS, pointed out, counterfeiters thrive when there are component shortages and “obsolete parts is an extreme example of shortages." In this case, counterfeiters often offer bogus parts to desperate buyers.

 

As a result, buyers should go toward approved and preferred distributor-broker partners. In addition, they should also emphasize parts testing.

 

Aiming at the potential bogus components, Alcatel-Lucent has strict and special requirements to validate any parts. Their “preferred” brokers and partners need to perform a variety of quality and reliability checks on the physical fit and form of the parts, including providing photographs of the device and the packaging as part of the offer review. In addition, the date codes of the material also have been tested, which ensure a across-the-board avoiding from bogus parts.

 

Diffley said if a buyer is not purchasing parts directly from component manufacturer; the buyer needs to be very careful and very judicious because of the increase in counterfeit production.