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The I-Connect007 Editorial Team spoke with Digi-Key senior managers Levy Olson (product management) and Kelsey Lawrence (operational excellence) about parts availability and how to manage the challenges of the ongoing shortages in supply. Levy and Kelsey share some intriguing statistics on counterfeit parts and discuss how Digi-Key ensures their extensive inventory is stocked with authentic parts.
Nolan Johnson: Recently, I took an organized tour of EMS houses in San Jose. At each stop, I would ask, “How’s business going?” And the answer was always, “Great! If we can find the parts.”
On one of the tours there was an area in a warehouse with a bunch of loaded pallets. The tour guide explained that was $2 million worth of parts waiting for the arrival of another $500 worth of parts so they could build the board. I’m sure the numbers were meant metaphorically but still, that’s their reality on the floor.
As a major global distributor for both prototypes and production, Digi-Key undoubtedly has some insight on what’s happening. What are the dynamics at play here?
Levy Olson: We’ve been hearing a lot of just that. There are specific components which have very long lead times that are holding up production. Internally, we jokingly refer to them as the “golden screw.” If you have that part, you can build those products. Semiconductors seem to be one product group affected more than the others. Unfortunately, semiconductor is where it does get harder to find a direct replacement. If it’s a microcontroller, for example, it’s pretty much impossible.
Johnson: We can read, even in the mainstream media, about semiconductors. You hear all the news about Intel and other manufacturers announcing new U.S. semiconductor manufacturing facilities, as well as globally, to create more capacity and resilience. At the same time, the projected demand curve for semiconductors still outpaces the planned build out. Do you see it getting better, Levy?
Olson: I think it’s going to get better, but it might take a little while. We talk about shortages, but in the last two quarters in a row, Digi-Key has received the most product ever. So, it’s not necessarily that the shortages within the market are because the manufacturer isn’t making product, it’s because demand is so high.
What happens to demand in the next six to 12 months will determine what happens to the supply of the products. We’re starting to see pockets and lead times coming down a little bit. Nothing quite substantial, but different technologies have their different challenges. We’re seeing some instances where lead times are getting a little better.
Johnson: So even though production hasn’t ramped up yet, lead times are improving. What’s your sense of why that is?
Olson: Throughout COVID times, there was a lot of talk about factories unable to produce because they were shut down; we aren’t seeing as much of that lately. Now we’re seeing factories operate at a high output level. There’s just such a strong demand.
To read this entire conversation, which appeared in the August 2022 issue of SMT007 Magazine, click here.