Semiconductor Obsolescence Management Best Practices

Component obsolescence can disrupt and delay entire supply chains and product production. The past few years' COVID-19 pandemic and global chip shortages have significantly changed the electronic industry and highlighted the need for a more dynamic and holistic approach to obsolescence management in the semiconductor industry supply chains.  

Historically, the semiconductor industry followed a cyclical production and sourcing pattern, but the past years' unforeseeable events caused disruptions in global production and logistics operations. Record lead times and price hikes exposed the limitations of the existing microelectronics ecosystem based on just-in-time (JIT) inventory planning and fab-lite business models, which could not keep up with post-pandemic demand.  

These events, fast-paced technological innovation, and unpredictable market demand have led to accelerated component obsolescence, causing significant problems for OEMs. As a result, companies have been taking a closer look at building more strategic component obsolescence management and mitigation strategies.  

What is Obsolescence Management?

Obsolescence is when a component or technology is no longer available or supported by the manufacturer. It can lead to significant production delays, cost increases, and quality issues. This can happen due to various reasons, such as technological advancements, changes in market demand, or the availability of newer and more efficient alternatives.

PCNs (Product Change Notifications) and EOLs (End-of-Life notifications) are two important terms associated with semiconductor obsolescence. PCNs are notifications issued by manufacturers to inform customers about any changes to a particular semiconductor product's production, design, or specifications. This can include changes to the packaging, materials, or production processes. EOLs, on the other hand, are notifications issued by manufacturers to inform customers that a particular semiconductor product will no longer be produced or supported after a certain date.

PCNs and EOLs are essential because they allow customers to plan and prepare for the eventual obsolescence of a particular semiconductor product. This can include finding alternative sources for the product, redesigning their products to use newer and more efficient alternatives, or stockpiling the product to ensure a steady supply after it has been discontinued.

Obsolescence Management is a set of actions that can minimize the risks related to the absence of a component or product. It is an essential strategy for large businesses as it allows manufacturers to identify life cycle risks and their impacts before they become costly enabling companies to maintain business continuity throughout their product life cycle.  

Why Obsolescence Management?

A robust Obsolescence Management strategy can help companies save millions of dollars by avoiding product-to-market disruptions, eliminating product redesigns, and allowing for strategic product lifecycle management.  

Component obsolescence occurs due to several reasons, such as technological transformations, government regulatory modifications, and supplier mergers and acquisitions.  

Suppliers often discontinue the production of older chips and prioritize manufacturing new and more advanced components to meet market demand leading to a product change.  

According to the JEDEC standards, a supplier must notify its customers with a product change notification (PCN) 90 days before the expected change. Although suppliers usually try their best to keep their customers informed with PCNs and EOL notices, many fail to meet the JEDEC compliance due to market changes. This is why obsolescence management is crucial in the semiconductor industry.  

The electronic components industry must take a more dynamic and holistic approach to obsolescence management to adapt to this new reality. This requires a shift from traditional linear supply chains towards more agile and responsive supply networks that can quickly adjust to sudden changes in supply and demand.

What are Some Obsolescence Management Best Practices?

Semiconductor obsolescence management is essential for organizations that rely on electronic components in their products or systems. Designing electronic products with component obsolescence requires a proactive approach to manage potential risks and ensure product longevity.  

One key strategy for managing obsolescence is to focus on component lifecycle management (CLM). CLM involves actively monitoring and managing the lifecycle of electronic components, from design and procurement to deployment and eventual end-of-life (EOL) phase. By doing so, OEMs can identify potential obsolescence risks early on and take proactive measures to mitigate them.

Another essential strategy is to build more resilient and diversified supply networks that can mitigate the impact of supply chain disruptions. This may involve working with multiple suppliers and partners, investing in local production capabilities, and developing contingency plans for unexpected events.

Your obsolescence management plan should begin during the design phase. Incorporating obsolescence management and using a proactive approach to address obsolescence issues in the design phase can help mitigate risks associated with component obsolescence.  

Develop a contingency plan that includes a strategy for addressing obsolescence issues. This means planning for potential obsolescence issues ahead of time and includes identifying alternative components, pre-qualifying replacement parts as well as alternative suppliers, and designing modular and easily upgradable products. Finally, future-proofing the design by using components that are expected to remain available for an extended period can help extend the product's life cycle. This includes considering the latest technology trends and the expected longevity of the components.

Next is implementing a product lifecycle and component change management process to help manage obsolescence risks and ensure product longevity. It's crucial to regularly assess your components and systems to identify any parts at risk of becoming obsolete.  

This includes regularly monitoring and reviewing product lifecycles, and market trends, identifying obsolescence risks, and developing product modifications or replacement plans.  

Finally, OEMs should consider incorporating new technologies and platforms to improve supply chain visibility and efficiency. These technologies can provide real-time insights into supply chain operations, enabling OEMs to identify potential bottlenecks and take corrective actions quickly. Using component monitoring tools will help you stay on top of the latest obsolescence risks and receive early risk detection alerts to potential issues, giving you more time to address them before they impact your production.

In Summary

In summary, the electronic industry must adopt a more dynamic and holistic approach to obsolescence management in response to market disruptions. This requires a shift towards a more agile and responsive supply chain network. As well as adopting new technologies and strategies that can help mitigate obsolescence risks.

By incorporating obsolescence management into the design phase, building strong supplier relationships, and contingency plans, organizations can proactively manage obsolescence risks and ensure the longevity of their products.  

See how Z2Data can help you build a robust obsolescence management program.