January 30, 2017

A Turbulent Industry: The Evolution of Component Distribution and the Future of Obsolescence Management

Since the harnessing of static electricity and the understanding of its production and ultimately useful storage, inventors have been refining the ways in which we can advance technology. Currently, Taiwan Semiconductor Manufacturing Company (TSMC) believes their semiconductor processing plant will be mass producing 5nm process transistors by 2020. (Smaller transistors are preferred worldwide because they allow their “switch” to be reset more quickly, allowing faster data exchange. With a human hair around 75,000nm in diameter and a red blood cell 6,000nm in diameter, 5nm is thus phenomenally small.) The pace of change is incredible and as technology advances, the human element becomes the limiting factor – from iterative design through to simple things like shipping and delivery.

When Arrow Electronics was founded in 1935 in New York City the company was focused on repairing radios, with components that were often as large as your fist. At this stage obsolescence didn’t really exist as a concept outside of the horse/automobile dynamic and certainly not in electronics. Televisions didn’t exist as a massive commercial venture and transistor development only started to make large advances in the mid-20th century.

Today, in stark contrast, the electronics supply chain is one of the largest and most automated industries on the planet, worth hundreds of billions of dollars. The top 25 distributors are valued at over $85bn in annual sales. Many hundreds of companies are franchised to distribute components for original component manufacturers (OCMs), while many thousands more exist in the non-franchised space (concepts explained in my previous blog). With this huge spread of technology and massive choices in supply partners, there is a similarly massive opportunity for nefarious organisations to exploit even the most sensitive supply chains. So who can you trust? When we layer onto this enormous market the knowledge that several well-respected experts place, the consequences of counterfeit electronics at up to 8% of the global market, we start to see larger issues with trust and supply-chain security.  

Experts exist across the market in avoiding counterfeits. Standards bodies such as SAE International, IDEA, and government agencies like UK MOD and US DOD can advise on best practices and offer certification, but in reality only some distributors are adhering to them. 

Of course, not every independent distributor is the same, and as with any industry, some are better able to absorb the cost, logistics, and time commitments needed to adhere to stringent certification requirements. For example, test and inspection commitments are a significant factor when considering partners in your supply chain. What level is appropriate for your customers, though?

Selecting suppliers who have deep investments in x-ray fluorescence (XRF – the measurement and determination of the composition of materials), x-rays (the non-destructive testing of components to confirm internal characteristics), and decapsulation (the destructive testing of components to confirm internal characteristics) technologies in-house is advisable, but this restrains your breadth of choice. Our own quality and compliance expert Dwight Gerardi penned an excellent series of blogs detailing our capabilities; this is an excellent place to start when evaluating future suppliers and partners.

Ultimately, deciding which level of testing, certification, and security in your supply chain is appropriate for your customer base is something that will be unique to every company. However, in an increasingly risk-averse industry, how much of your brand capital could be lost in choosing the wrong partner?

To understand more about industry best practices, or anything covered in our Converge blog series, please reach out directly. I’m delighted to hear from you at rob.picken@converge.com

Keep innovating! 

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