From a distributors point of view – Rochester Electronics
When the supply for semiconductors runs dry a set of issues arise, some can be overcome by additional planning, re-designing, risk mitigation, and the all so-allusive commodity of time. But still, what’s most needed is know-how and experience in how to deal with disruptions of this magnitude.
In this article series, Evertiq has reached out to distributors and sourcing specialists of electronic components to see just how the experts are dealing with the current semiconductor shortage and what tools they have in place to cater to the needs of their clients. This time we're talking to Colin Strother, Executive Vice President at Massachusetts-based Rochester Electronics.
Since the start of the pandemic the situation surrounding the supply of components has only gotten worse, how would you describe the past year in terms of operations?
“Supply issues in the last two years have undermined the normal delivery certainties. COVID related manufacturing, shipping disruptions, and even unexpected natural disasters have led to supply chain uncertainty and lengthening lead-times. Component Discontinuation notices have risen by 15% over the same period, as 3rd party fab priorities have changed, and the industry refocuses its fab investments to address a lower-powered battery-dominated landscape. The current semiconductor market shortages are widespread,” Colin Strother tells Evertiq and continues.
“Rochester Electronics’ focus on providing a continuous source of semiconductors aligns strongly with the long lifecycle requirements of equipment manufacturers. We provide 100% authorized stock of active and end-of-life (EOL) devices from over 70 semiconductor manufacturers. Fundamentally in times of shortage and increased obsolescence, we are well-positioned to support customers in these times of need and that is exactly what we have been doing by shipping more than 1 billion products in the last year.”
In the past, during periods of component shortages, we’ve seen an increase of counterfeit components hitting the market – what kind of measures does Rochester have in place to catch these?
“Lean supply chains have met a demand upswing and supply constraints; all market sectors are affected. The customer is under a huge amount of pressure to guarantee supply, and typically gray market or unauthorized sources are seen as the only solution. The counterfeit business is huge and sells through these gray market channels to infiltrate into the end customers. When times are tight, and products are not available then the risk of an end customer becoming a victim of counterfeit product increases significantly. Yes, there are testing and checks that can be done to ensure the products are genuine, but these take time and are costly to perform and, in some cases, still not fully guaranteed.”
“The only way to ensure genuine product is to buy from an authorized source where you are absolutely guaranteed the pedigree of the devices. Authorized suppliers like ourselves offer risk-free sourcing, and the only real safe option to keeping customer’s production lines operational during shortages, allocation, and obsolescence.”
“Though no one likes to be fooled by counterfeit products, in the world of components, procuring one could prove disastrous. It is uncomfortable to imagine a commercial airliner, missile, or life-saving medical device receiving a critical component replacement which is fake and fails in the field, but these are the stakes, and they are high,” Colin Strother, says.
Mr. Strother continues to explain that buying from an authorized source who partners with the original component manufacturer eliminates these risks. Fully authorized distributors –like Rochester Electronics – identify themselves as compliant with the SAE Aerospace Standard, AS6496.
“Simply stated, they are authorized by the original component manufacturer (OCM) providing traceable and guaranteed products with no quality or reliability testing required because the parts are sourced from the OCM.”
Which specific product group has been the most affected by the shortage?
“Regarding product categories, the supply chain shortage is presenting difficulties in two different ways. One is for multisource devices that are being overwhelmed by the volume of demand and the second is on proprietary products where fewer alternative options exist,” Strother explains and continues to provide examples.
“The Power Management and Power Discrete categories are good examples of the multi-sourced devices presenting availability challenges. In many instances, these are available from multiple sources or have close equivalent among different suppliers. However, because of their widespread use in multiple applications and across multiple industries, the sheer demand on supply has been persistent and has challenged suppliers to keep up with demand.”
“The microcontroller and microprocessor products are also experiencing supply chain challenges, but for a different reason. MCUs, and MPUs face design restrictions that limit alternative options, and suppliers are faced with choosing the right product mix to manufacture. These devices are typically based on a particular CPU core, embedded memory, and a set of peripheral functions. This results in specific package & pinout requirements, along with potential software and code impact. In general, the best option is within the same product families. Here devices with larger memory, broader temperature range, or higher performance may be available or an earlier revision of the device that had previously been qualified is in stock and available as a drop-in solution. In the more extreme cases, to keep their production line moving, we have witnessed customers justify board re-spins to accommodate a different package.”
What are your feelings about the current market situation as we enter 2022?
“The semiconductor industry can be notoriously cyclical. Since the founding of Rochester Electronics in 1981, we can recall approximately 19 industry cycles of varying magnitude. The reason for each cycle can be different. They all tend to start abruptly and end abruptly. A key difference of the current period of market constraint is that it is not set against a booming global economy. In fact, quite the opposite. In our current environment, it is even more challenging to predict the outcome. Will it be ending soon, quickly followed by often-seen overstocking, set against weak economic demand, resulting in a market decline? Or will it continue to be protracted and exacerbated by a strong demand profile based on global economic recovery, as a result of overcoming COVID-19?”
The Executive Vice President brings up the fact that 2021 was an unprecedented year in the semiconductor industry with the World Semiconductor Trade Statistics having forecasted a 25.6% marketing growth in 2021, and the market is expected to continue to grow by 8.8% in 2022.
“This has resulted in component shortages over a range of industries and led to an increased focus on extending end-of-life for applications where equipment longevity is critical” says Colin Strother and continues. “Rochester Electronics is well-positioned to support our customers in these sectors with our inventory of components and wide range of semiconductor manufacturing services.”
This year Rochester Electronics has continued to invest in semiconductor manufacturing capabilities, especially in areas like 300mm die processing and US-based plastic package assembly.
“Looking ahead, we see automotive electronics as becoming a major part of Rochester's strategy, and to deepen our commitment to providing customers with the highest standards of products and services we have enhanced our Quality Management System. In fact, we have just received the IATF 16949:2016 letter of conformance for the Design and Manufacture of semiconductor components. For 2022, we continue to see strong demand in sectors such as 5G telecom, Automotive, and Medical, especially for US-based manufacturing capabilities.”
For 2022, what plans does Rochester have in store to further deal with the problem at hand?
“The current state of the semiconductor industry has presented some challenges to the supply chain and to manufacturing, resulting in lead-time extension for many key products. Rochester Electronics has been well-positioned to help alleviate supply chain disruption. With our 100% authorized and guaranteed inventory, we have experienced an extraordinary increase in volume of customers seeking our risk-free solutions both with EOL and active products.”
Despite being traditionally known for EOL products and solutions, today around one-third, which is 5 billion devices of the company’s in-stock inventory is active product.
“To better satisfy our customer expectations for quality and service, we have continued to develop more efficient digital processes, expand our sales offices in each major market providing 24-hour global service and support,” Mr. Strother says. “Our focus, now and in the future, is to better service our customers’ immediate need by further developing our supply chain solutions, while continuously expanding and supporting the world’s largest portfolio of in-stock inventory available for immediate dispatch.”
The Executive Vice President ends by explaining that while developing and expanding the company’s product-focused service solutions, Rochester is also increasing its warehouse capacity, automating processes, and further expanding its global sales support – both physically and digitally.