Workarounds for the current chip shortage
Even the cheapest component can stop the most expensive product from leaving the production line. It is a truism of our industry, one that is being felt by end customers across all verticals.
When faced with a temporary shortage in supply, OEMs have several options. Each has implications on their business and choosing the right one will depend on more than one factor. From an engineering point of view, the problem may be a missing component. From a business perspective, the issue presents itself as a product that can’t be shipped or a customer who can’t be served.
Here, we take an objective look at the issue and potential solutions.
Lead times are a constant consideration for OEMs and as the Avnet Insights Report: Deconstructing the Chip Shortage indicates, it is something that many feel will become more serious under the current market conditions.
Long lead times can be planned for if known. The unavailability we are experiencing right now is an unknown. Planning for unknowns is more challenging and imposes some difficult choices.
For example, product lifecycles may vary but the general trend indicates they are reducing. The time-in-market is just as important as time-to-market. In fact, it may be more important. The time-to-market is almost fixed by design. OEMs know how long it takes to design, test, verify and certify a new product. The time-in-market is subject to external influences including competitor activity, advances in the underlying technology, and megatrends such as electrification and digital transformation.
The current climate means your competitors will also likely be dealing with component shortfalls. Megatrends are driven by adoption, but adoption can only thrive when supply is plentiful. Technology marches to its own drumbeat but even that likely slowed in recent months. These are, at a high level, all positive impacts for OEMs, if not for the end customers.
Designing the part out
One of the first workarounds OEMs may turn to when faced with a component supply issue is to design the part out of the system. The Avnet chip shortage survey indicates this is a direction many OEMs are now considering.
Changing one component in a design has the same impact, downstream, as changing many. The entire system will need to be exhaustively tested and verified. And if the product is subject to certification, the certification process may well need to be repeated, even if just one component has been replaced.
Because of this, OEMs may choose to turn the problem of a missing component into the opportunity of moving to the next release of a product early.
However, as mentioned above, product lifecycles are geared to the time-in-market, which is a largely external influence. If you are only eight months into a two-year time-in-market for the current version of your product, bringing the next release forward by over a year will not necessarily reset that clock. Your new release may only have the remainder of that two-year period left to return a profit.
Supporting current versions longer
This spreadsheet analysis of ROI may mean the new release is not brought forward and, instead, the current version is simply supported through to the beginning of the next product cycle.
The consequence of this strategy relates to customer retention and market position. Manufacturers may need to take an objective view on their market position for that product and decide if the effort to remain in that application area is simply too great.
Designing new boards
Another consequence of designing-out a component is the potential impact on the inventory of bare PCBs an OEM may have in stock. Often it is possible to find a pin-to-pin replacement for a component, particularly if it is passive. However, if that isn’t possible, the PCBs may need to be modified using laborious hand-wiring techniques. The alternative would be to scrap the bare PCBs and design new boards.
Many thousands of OEMs are having these same discussions at the executive level. The impact of the chip shortage at the printed circuit board level is likely to create long-lasting ripples in those industries that rely on the electronics sector. It is this legacy that will shape the way manufacturers approach new opportunities in the future.
For more insight into the current chip shortage, read the Avnet Insights Report: Deconstructing the Chip Shortage.
Download Avnet Insights Report