Traditionally, the electronic design process involved creating a prototype and translating that design directly into production. However, given the current landscape of the semiconductor industry, taking this approach today is likely to result in supply chain issues and severely impact your production timeline and costs.
This post will explain the causes and impact of today’s chip shortage as well as discuss potential solutions product engineers can use to stay afloat.
Why Is There an Electronic Component Shortage?
Today’s components shortage has been a problem since before the COVID-19 pandemic, when several emerging technology trends began picking up steam:
- Automotive industry: The rising popularity of smart driving technologies like infotainment systems, navigation and advanced driver assistance systems caused a lasting spike in chip demand.
- Internet of Things: Various industries are adding Internet of Things (IoT) sensors and wireless capabilities to various products, increasing demand for boards.
- Growth of 5G: 5G, rolled out in 2019, is projected to cover up to 65% of the world’s population by 2025. This rapid expansion is driving a surge in demand for electronic components as consumers purchase new devices.
When the pandemic hit, however, demand for cars dropped. The healthcare and consumer electronic products sectors experienced surges in demand due to an increased need for electronic medical equipment and personal devices. Additionally, facilities shut down in response to the pandemic, which halted production.
Years later, component manufacturers are gradually returning to their pre-pandemic production levels. However, an increasingly fragile supply chain and rising international tensions are causing issues for companies producing critical electronics.
How Do Electronic Component Shortages Affect Companies?
Out of all the parties involved in a supply chain, manufacturers take the brunt of parts shortages. When hit by a shortage, many manufacturers can’t build products without making modifications, which often requires product re-certification. This results in manufacturing delays and longer, more complex design processes for new products.
Some issues that compound the impact of shortages include:
- Stockpiling: Often, large companies will buy components in bulk and hoard them, which artificially inflates demand and worsens supply chain issues.
- Component allocation: When demand exceeds capacity, many suppliers spread deliveries over a long period. This leads to uncertain delivery forecasts and supply chain bottlenecks.
- Counterfeit parts: Like with any other valuable commodity, counterfeit PCBs are always a risk. This issue mostly affects smaller manufacturers who use third-party distributors, as the distributor might purchase components from untrustworthy sellers.
- Price inflation: When prices are high, smaller companies are most at risk. Large manufacturers with significant capital can afford to pay a premium to maintain short lead times, edging smaller companies out of the market. This price hike often extends to the end users.
How Can Product Engineers Minimize Shortage Costs?
According to insights from Goldman Sachs, the semiconductor chip shortage is likely to continue well into 2023. However, it’s hard to reliably predict when it will end for certain.
Making a plan that accounts for component shortages can help you minimize risk and strengthen your supply chain. Whether you are developing a new product or improving an existing design, there are steps you can take.
1. Plan for Shortages
Thinking about shortages as early as possible is key to staying on track. Whenever you can, leverage people with semiconductor supply chain expertise. They can help guide you to the highest quality and most cost-effective options.
Work closely with your design house to select the most resilient components for both the prototyping and production stages. Most design firms have close partnerships with manufacturers and suppliers, so they can help you quickly source components to meet your deadlines.
Then, speak with all your candidate manufacturers. Contacting suppliers directly is critical because it can help you get the most accurate idea of their lead times.
Whenever possible, choose low-risk components that are unlikely to be affected by shortages. Some components may be available from multiple manufacturers, which can help improve your supply chain’s resilience. An effective technical team can help optimize PCB capabilities and increase speed to market.
For example, when a US-based OEM was experiencing component shortages and long lead times for integrated circuit (ICs) components on one of their bare boards, they turned to MCL to provide design knowledge and component sourcing expertise to ensure they could produce the in-jeopardy PCBs cost-effectively and with the same performance requirements. When their current suppliers were unable to assist with finding cost-effective alternatives, MCL was able to work with the customer and a design partner to redesign the PCB with flexibility allowing various components to be used based on component availability, without the need for a future redesign. Once the design was finalized, MCL was able to supply the boards within days.
When it was time to reorder the boards, the customer experienced yet another component issue. However, because of the design and flexibility implemented in the last revision, they were able to utilize another approved alternative for the board and maintain their quick lead time.
MCL provides value and expertise in design for manufacturability to optimize your boards and maximize component availability to increase your speed to market.
2. Assess Risk of Key Design Elements
Once you have a finished design, you will need to evaluate its risk of running into shortages.
Identify which parts would be hardest to find alternatives for in the event that a shortage does occur and consider backup plans. For example, your design also includes components that have no drop-in replacements. While these parts may be easy to procure now, you may not have an alternative option if they become unavailable for any reason.
It’s critical to find components that use the correct process nodes for your product. Newer components will be in higher demand than those typically used in older devices, meaning they’re more likely to suffer shortages.
As soon as you’ve finalized your design, place purchase orders for mass production. Acting quickly reduces the risk of other companies buying out the available components before you can.
3. Choose Parts Wisely
Optimize your design for potential alternatives or replacements. This will make it easier to incorporate any necessary changes later in the development process.
It can also help to negotiate with manufacturers and suppliers early in the design process to find as many sources as possible for your critical components.
Here are some proactive design tips:
- Choose common parts: Design your circuitry so you can easily swap out high-demand components with identical or very similar electrical specifications. While common parts may be more expensive than specific ones, incorporating potential replacements into your initial design provides some extra flexibility.
- Seek drop-in replacements: While designing, look for alternatives for your non-critical components. Prepare a list of drop-in vendors to reduce the risk of shortage when you move into the building phase of production.
- Include extra space: Incorporating extra space into your design enables you to use different PCBs without needing to completely scrap your design. You can also space out your mechanical components to minimize the number of mechanical changes you may need to make if you need to change electronics.
4. Redesign or Redevelop
You might have to completely redesign your product. Depending on how extensive your changes are, your production timeline could be delayed by anywhere from a few weeks to a few months.
For example, if you need to swap out your original PCB with a new one, you might need to source new connectors and make firmware changes, which can take months. It might take even longer if you choose to wait for your original components to become available again.
Strengthen Your Supply Chain With Millennium Circuits Limited
Taking proactive steps to reduce your risk of suffering parts shortages is critical for minimizing production costs and keeping production on schedule. Part of that process involves forming a strategic partnership with a value-added PCB supplier who has the material expertise to optimize your boards and maximize component availability.
MCL has supplied engineers and manufacturers with top-quality PCBs at competitive prices since 2005. We provide our customers with technical expertise throughout the development process that helps them improve speed to market by 19.8%. Contact us today for more information.