How to cope with semiconductor obsolescence

Semiconductors have made national headlines in the past two years. The COVID-19 pandemic and its domino effect on global supply chains have caused shortages that impacted a multitude of industries.

At the same time, frequent mergers and acquisitions of semiconductor manufacturers have worsened one of the industry’s biggest problems — obsolescence.

Semiconductor shortages are impacting consumers' ability to purchase the latest mobile and computer tech. They are also affecting their ability to buy automobiles, white goods, and even LED lights. However, despite their importance in the production of everyday items, obsolescence is still becoming a growing issue for semiconductors.

The increasing pace of obsolescence

In 1970, experts expected the typical semiconductor life cycle to be about 30 years. They reduced this to ten years by 2014. Thus, achieving a 60 per cent reduction in less than 50 years. However, consumer electronics don't consider this a huge problem, as they release new smartphones and laptops around every six months.

Machines used in industry are designed to survive for decades. Therefore, the shorter lifespan of its parts can be a major obstacle. Fast semiconductor obsolescence has a significant impact on highly regulated industries like automotive, aerospace, defense, and medical device manufacturing. Using a different component than specified in the original design can lead to time-consuming testing procedures in these sectors.

Why are semiconductors becoming obsolete faster than in the past?

Partly, this is because of the natural pace of technological progress. Leading semiconductor manufacturers to phase out older models. Meaning, there is room for more efficient and cost-effective alternatives.

Also, older models are normally embedded in legacy devices. These can depreciate so much that continuous support by the original equipment manufacturer (OEM) is not convenient.

However, since the start of the COVID-19 pandemic, another phenomenon has contributed to the fast pace of semiconductor obsolescence. This is a big round of suppliers’ mergers and acquisitions. For example, in 2021, Chinese-owned Nexperia acquired NWF, the UK’s largest chip plant. In the same year, Renesas acquired Dialog Semiconductor, almost simultaneously with ADI acquiring Maxim Integrated.

When this happens, the purchasing company may decide to streamline the product portfolio of the company it acquired. Therefore, phasing out semiconductors that are less in demand to prioritize the manufacturing of newer models. This trend further increases the volatility of the already fragile semiconductor supply chain.

How do I cope with obsolescence?

When a product reaches its end of life (EOL), OEMs issue a last time buy (LTB) notice. This usually gives manufacturers between six and twelve months to buy and stockpile components before they are discontinued. However, LTB does not guarantee that all manufacturers using that technology can place and receive orders on time.

Keeping up-to-date with industry changes, mergers, and acquisitions can help manufacturers predict which components are likely to be discontinued. To help with that, EU Automation regularly announces when popular components are reaching their EOL. Both in a newsletter and on social media.

It’s also imperative that manufacturers are aware of the obsolescence risk of semiconductors that are embedded in mission-critical equipment. As well as, that they track the life stage and health condition of such machinery with an adequate predictive maintenance program.

This will allow them to spot potential failures before they cause irreparable damage. They can also order hard-to-find spare parts before anyone else. A trustworthy supplier that specializes in obsolete spare parts can also be a great resource. This is because they can help manufacturers source quality spare parts from a global network of qualified partners.

These strategies will not prevent semiconductors from becoming obsolete. However, they might help offset the negative repercussions of obsolescence on business’ bottom lines.