The Impact of Obsolescence and Shortages on Counterfeit Risk

Reading time ( words)

While obsolescence and shortages have always been an issue, recent large-scale disruptions have made the electronic components supply chain even more volatile.

Since last December, the global chip shortage has caused pricing shifts, lead time delays, and widespread stockouts. The shortage is bringing a higher-than-normal number of counterfeit parts into the supply chain.

To adequately address the problem, it is important to understand its root causes, exacerbating factors, and how its impact can be avoided.

What Are Shortages and Obsolescence?
Obsolescence refers to parts that manufacturers no longer produce, and vendors no longer carry. Traditionally, microelectronic devices move into obsolescence after reaching end-of-life (EOL), the point when their manufacturer no longer makes, sells, or markets them. Since the item’s lifecycle is over, distributors commonly discontinue carrying and providing support for EOL items.

Shortages occur when specific electronic components are unavailable or only available in constrained quantities. Bottlenecks commonly occur when market demand for certain items exceeds the available supply and production capacity. Shortfalls can sometimes occur when production and delivery are interrupted by natural disasters or geopolitical conflicts. Moreover, parts shortages occur if raw materials used in their construction become hard-to-find or unavailable.

What Drives Shortages and Obsolescence?
Obsolescence is typically driven by a lack of market demand, mergers, acquisitions, or product line consolidation.

Notably, recent events have exacerbated the impact of the latter two factors on the semiconductor market. In 2020, various microelectronics companies announced a record $118 billion in M&A agreements. As those deals conclude, firms will streamline their combined component portfolios to eliminate redundancies and reduce costs.

Moreover, IHS Markit revealed in April 2021 that chipmakers are increasingly making their aging parts EOL to address shifting end-market priorities. High demand exceeding production capabilities typically creates shortages. That imbalance is a significant driver of the current global chip bottleneck.

To read this entire article, which appeared in the January 2022 issue of SMT007 Magazine, click here.


Suggested Items

M&A Activity: Keep Your Eye on the Ball

03/29/2022 | Dan Beaulieu, D.B. Management Group
M&A activity is on the rise and shows no indication of slowing down, even if interest rates climb. In the past two years, there were more than 45 deals. Where does your company fit in? In this interview with Dan Beaulieu, M&A expert Tom Kastner breaks down the market and who benefits most when it comes to buyers, sellers, and where you live.

Going Global: Bridging Today's Labor Gap

03/18/2022 | I-Connect007 Editorial Team
No doubt you will relate to Foad Ghalili when he expresses his concerns about rising input costs to doing business, from getting the right components, to delivery times, and price increases. But what’s unique for the president of Epoch International is the way his company has leveraged its U.S. and China operations to make the most of the other thing on everyone’s mind—the labor shortage. If you’re not already implementing his ideas, you will walk away from this interview with some sure-fire tips.

The Under-Reported Story of the Semiconductor Shortage: Counterfeits

02/10/2022 | Bill Cardoso, Creative Electron
At this stage, we are all aware of the semiconductor shortage. While chips are still in short supply, there’s been no shortage of news stories about the chip shortage. If media coverage of the problem actually generated chips, the shortages might well be over. We’ve all seen stories about exploding demand for consumer electronics, factories shuttered during COVID-19 lockdowns, supply chain bottlenecks, a dearth of raw materials, and even drought, all in an effort to explain why we can’t get enough of these critical components.

Copyright © 2022 I-Connect007. All rights reserved.