Defeat Obsolescence via Extended Manufacturing

The problem of obsolescence is common, unremitting, and complex—and it’s not going to get better any time soon. Consolidation in the semiconductor industry, as well as huge investments by many chip makers in new fabs producing the most sophisticated chips, have translated into a worrisome trend for those who need a predictable long-term stream of specific (and older) parts. Meanwhile, a growing number of OEMs need a particular product well beyond the time when the technology makes a compelling business case for the chip maker. At that point, it’s time for you, as a customer, to get creative about ensuring an ongoing product supply by working with a distribution partner to create a strategy for a particular part to avoid obsolescence.

Semiconductor component life cycles are mismatched with end product life cycles in many markets, including automotive, industrial, networking, and defense. Worse, as semiconductor makers shift their product mixes, more devices are likely to come to the end of their life. This creates an inconvenient and potentially costly situation for a semiconductor component customer. Any EOL announcement starts a predictable round of questions, including where can the product be sourced in the short term? Will it be possible to find another source? Do we need to redesign or requalify another part? Extended manufacturing as a strategy adds another dimension to the obsolescence solution matrix. Extended manufacturing is a win for everyone involved including OEM, component manufacturer, and distributor.

Expanding on the win/win/win scenario, extended manufacturing provides a win for everyone involved. For the semiconductor manufacturer, allowing a third party to take over the manufacture of mature technologies allows the semiconductor manufacturer to focus on innovation without abandoning customers who still need a more mature technology.  For the OEM community, an affordable source for a desired product is created. The third party delivers chips with the same form, fit, and function of the original with the same reliability and quality—and can be manufactured for as long as needed.  For the distribution partner, extended manufacturing provides a way to meet customer demands in a way that makes financial sense.

The key to success is identifying a business case that creates a win/win/win for all three parties, the customer, the original semiconductor manufacturer and the distribution partner. Often, for a general commodity, such as memory or standard logic, extending manufacturing won’t offer the right cost/benefit ratio due to pin compatible replacements.  However, many other times, a partnership makes sense:  a third party can engage with an original semiconductor manufacturer to build the component using the same wafer foundry, assembly and test locations. While the circumstances of the EOL may vary (wafer fab process, package or test platform obsolescence), we see extended manufacturing working well in a variety of scenarios, including:

• High value, low volume: Customers that need several dozen of a high-value part.
• Lower value, high volume: Customers that need a large volume (thousands) of a low ASP semiconductor part.
• Specific footprint: A semiconductor part with a unique pin-out that makes a pin-compatible drop-in replacement impossible.
• Long term: A customer that is manufacturing a product that will need semiconductor parts fulfillment for several more years.

Too often, customers’ misconceptions lead them to dismiss extended manufacturing without enough consideration.  They are concerned that the product may not meet quality standards. Extending manufacturing done appropriately uses the same manufacturing flow, foundry, mask set, assembly, and test house as the original semiconductor manufacturer. With the possible exception of the logo, the resulting parts are identical, both physically and electrically.

Secondly, customers are concerned that extended manufacturing won’t make financial sense—or are unsure of how to calculate the merits of it.  It’s true that per-part pricing is at times a little higher than the original part. However, by using extended manufactured parts, OEMs can avoid the considerable cost of redesigning their product or qualifying a different part from a different manufacturer.  Shifting or halting a product’s supply chain is costly—and that can make extended manufacturing a cost-effective alternative.

Finally, sometimes customers are concerned that extended manufacturing partners are too new a market or that it’s an emerging strategy. The business model is proven effective and viable.  Resurgent Manufacturing Services, for example, has been in this market for over five years and has manufactured millions of parts.

In a world with mismatched component and end-product life cycles, smart organizations need to think beyond the usual sourcing solutions to imagine partnering with someone who can lengthen the semiconductor product pipeline through extended manufacturing.  Although not always the first line of defense for an obsolete device, extended manufacturing can prove to be the best sourcing option. By leveraging extended manufacturing strategically, OEMs can bridge the product life cycle gap and solve the obsolescence headache.

To read the article on EPSNews.com, click here: https://epsnews.com/2023/06/26/defeat-obsolescence-via-extended-manufacturing/