Chip shortage and fake chip phenomenon from distributor's perspective
Evertiq previously published a series of articles looking at the global semiconductor market from the perspective of distributors. In this series, the outlet reached out to electronic component distributors and purchasing experts to focus on the current semiconductor shortage and what they are doing to meet customer demand. This time they interviewed Colin Strother, executive vice president of Rochester Electronics, based in Massachusetts.
Q: The component supply situation has gotten worse since the pandemic. How would you describe the operations over the past year?
A: The supply problems of the past two years have undermined normal delivery certainty. Disruptions in manufacturing, transportation and even natural disasters during the pandemic have led to supply chain uncertainty and longer delivery times. There has been a 15% increase in component shutdown notices over the same period, due to changes in the priorities of third-party plants and the industry's refocusing of plant investments in response to the dominance of low-power batteries. At present, semiconductor market shortage is a common situation.
Rochester Electronics' focus on the continuous supply of semiconductor components fits well with the long life cycle requirements of equipment manufacturers. We are 100% licensed by more than 70 semiconductor manufacturers and have inventories of both undiscontinued and discontinued components. Fundamentally, we have the ability to support our customers in need at a time of increasing component shortages and obsoletions, and that's exactly what we've done with more than a billion products shipped over the past year.
Q: In the past, during component shortages, we have seen an increase in counterfeit components hitting the market. What has Rochester done to address this?
A: The supply chain is experiencing rising demand and supply constraints; All market sectors have been affected, with certain customers facing intense pressure to supply and resorting to the grey market or unauthorised dealers. The counterfeit goods business is huge and they are sold through these grey market channels and eventually penetrate the end customer. When time is of the essence and the product is not available, the risk of the end customer becoming a victim of counterfeiting is greatly increased. Yes, it is possible to ensure the authenticity of a product through testing and inspection, but this is time-consuming and costly, and in some cases, the authenticity is still not fully guaranteed.
The only way to be sure of authenticity is to buy from an authorized dealer to ensure the pedigree of the product. Authorized dealers like us provide risk-free sourcing and are the only truly safe option to keep our customers' production lines running during shortages, distributions and product obsoletions.
While no one likes to be duped by a fake product, in the world of parts and components, the results of purchasing a fake product can be disastrous. It is uncomfortable to imagine a commercial airliner, missile or life-saving medical device with a key component that is counterfeit and malfunctions on site, but these are the stakes, and the stakes are high. Buying from an authorized dealer that works with the original component manufacturer eliminates these risks. Dealers such as Rochester Electronics have 100% authorization, indicating that they are compliant with the SAE aviation standard AS6496.
Simply put, they are authorized by the original component manufacturer to provide traceable and guaranteed products without the need for quality or reliability testing because the parts come from the original component manufacturer.
Q: Which specific product group is most affected by the shortage?
A: The two categories most affected by supply chain shortages are general-purpose devices (multi-channel) and proprietary products where fewer alternatives exist. Such as power management chips and power discrete devices. In many cases, these products come from multiple sources or have close correspondence between different suppliers. However, due to their widespread use in multiple applications and multiple industries, supply demand has been high, challenging suppliers to keep up with demand.
MCU and MPU products are also experiencing supply chain challenges, but for another reason. These two categories face design constraints with few alternatives, and suppliers are faced with different product combinations to produce. These devices are typically based on a specific CPU core, embedded memory, and a set of peripheral functions, and specific packaging requirements, as well as underlying software and code, can also affect shipping. In general, the best option for the customer is for the products to be in the same lot. But we have seen more extreme cases where customers have reconfigured boards to fit different packages in order to keep production lines running.
Q: How do you feel about the current market situation as we head into 2022?
A: The semiconductor industry may be known as a cyclical industry. Since the inception of Rochester Electronics in 1981, we have had approximately 19 industry cycles of varying degrees. The reasons are different for each cycle. They almost always start suddenly and then stop abruptly. A key difference with the current market cycle is that it is not set against the backdrop of a booming global economy. In fact, on the contrary, predicting outcomes in our current environment is even more challenging.
Is it going to end soon, followed by the inventory overhang that we often see, in contrast to weak economic demand, leading to a market decline? Or will it be protracted and augmented by strong demand conditions based on global economic recovery after the pandemic is overcome?
2021 will be an unprecedented year for the semiconductor industry. World Semiconductor Trade Statistics has predicted that the semiconductor market will grow by 25.6 percent in 2021, and it is expected that the market will continue to grow by 8.8 percent in 2022. This has led to component shortages in many industries. This year, Rochester Electronics continued to invest in enhancing its semiconductor manufacturing capabilities, particularly in areas such as 12-inch chip processing and advanced packaging and assembly.
Looking ahead, we believe automotive electronics will become an important part of Rochester's strategy, and we have strengthened our quality management system in order to deepen our commitment to providing our customers with the highest standards of products and service.