[Technology Report]
Managing Product Obsolescence—Now You See It, Now You Don't
Impending international lead-free mandates are putting pressure on chip manufacturers to better manage their product portfolios.
When Allen-Bradley's Electronics Division phased out production of all of its electronic components in early 1997, it notified customers which products it was no longer supplying, including part numbers. On top of that, the company recommended specific replacement parts and suggested other manufacturers by name as possible sources.
Most semiconductor companies notify their customers immediately when a part is about to "disappear" from their catalog. National Semiconductor does so on a quarterly basis. Hewlett-Packard is working with supply-chain partners and others in the industry to streamline its obsolescence procedures, including material and components suppliers, contract manufacturers, and OEMs.
"If you're in procurement and receive this notice, you probably don't know that the notice affects the bill-of-materials for a specific customer," says Cliff Frescura, PCNalert's vice president of solutions. PCNalert is one of several companies that are building databases to provide chip suppliers and their customers with real-time electronic component obsolescence data and bill-of-materials management. "The possible result is that a manufacturer might be producing a board with an obsolete product," he adds.
Last summer, the market provoked suppliers to issue end-of-life notices for many of their components. Texas Instruments announced a new obsolescence policy, increasing the notification period for its discontinued logic and analog product lines from six months to a year, followed by a six-month period when customers can take delivery. TI said that because 80% of a customer's total development cost is determined at design time, failure to catch component-status changes by this stage could result in tremendous costs.
The pending international transition to lead-free devices is speeding the flow of new obsolescence notices. PCNalert is currently receiving 50 product obsolescence notices a day on average and expects this to increase as deadlines for new international lead-free products approaches.
There are actually several product-obsolescence management specialists who collect and provide obsolescence product data information for distributors, OEMs, and contract manufacturers. In addition to PCNalert, American Electronic Resource, with offices in California, Texas, and Australia, provides a search service for obsolete parts and technical support, while 4-Star Electronics stocks mostly obsolete parts from more than 400 manufacturers, updating its database daily. Semitronics Corp. also specializes in "hard to find" and discontinued devices. Texas Components says it supports the "almost daily disappearance" of linear, digital, and mixed-signal ICs.
Micro Circuit Engineering (MCE) maintains obsolete data-reading equipment, enabling it to replicate components for existing "long-lifetime" systems that need to be maintained and supported (typically military and industrial hardware). In many applications where equipment is being upgraded, MCE says it can add functionality to the original chip design while maintaining the original package dimensions. The i2 TACTRAC from i2 Technologies Inc. helps identify, solve, and minimize the impact of electronic component obsolescence for electronics distributors, contract manufacturers, and OEMs. Arena Solutions Inc. markets a product called Arena PLM to help manufacturers reduce errors in communication and share product data information with contract manufacturers.
WHAT'S IT GOING TO COST? As a general rule, supply-chain specialists believe that highly innovative products—such as semiconductors—usually produce higher profit margins. However, they become obsolete sooner and, as a result, may be more costly to produce. Less innovative products usually show lower profits, but also lower cost in terms of their obsolescence. But the growth of offshore contract manufacturing complicates the issue, often increasing cycle times. "Longer cycle times just inherently add risk," says Jan Anderson, National Semiconductor's director of supply-chain planning, Central Technology Manufacturing Group.
GET THE LEAD OUT Semiconductor manufacturers trying to meet the requirements of Europe's Restrictions on Hazardous Substances (RoHS) directive face a daunting task: Can they switch over to lead-free products, effectively obsoleting their current product lines, and meet all other directive requirements by 2006?
Most chipmakers seem to be ready for the change, but some are lagging. RoHS affects the shipment of electronic components into the 15 European Union (EU) member states, but that could quickly climb to 30 because other countries have applied to become EU members. Japanese companies are already operating under similar restrictions.
RoHS is actually based on eliminating six substances in electrical and electronic equipment. Lead is considered the biggest offender, as it's typically found on the termination finishes of most lead-frame and array packages. The list also includes mercury, cadmium, hexavalent chromium, polybrominated biphenyls, and polybrominated diphenyl ethers. Each of these substances must be reduced below the concentration values proposed by the EU.
Several larger semiconductor companies expect to have RoHS-compliant lead-free packages covering virtually their complete line of IC products by year's end. But they still must contend with changing out virtually entire product inventories, assigning part numbers to the new devices, and communicating all of these changes in almost real time to their distributors, OEMs, and contract manufacturers.
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