Align With the Boom & Bust Cycles for Semis

In the electronics sector, semiconductor cycles—both up and down—reflect a natural pattern. During prosperous times, allocation difficulties arise, causing OEMs to scramble for the necessary part numbers to develop their products. Some resort to untested and unfranchised sources to meet their demands. This practice increases the risk of counterfeit or compromised components infiltrating the final application, ultimately jeopardizing the product’s integrity. All these efforts are made with the genuine intention of keeping manufacturing active.

In times of slowdown, everyone looks at the calendar, questioning when the market will bounce back. Acquiring parts during these periods can still pose difficulties. As the market slows, semiconductor manufacturers tend to reduce production and often discontinue slower-moving devices, which creates supply issues for those wanting to continue their use. Occasionally, manufacturers might even phase out well-performing devices during downturns to secure the cash influx anticipated from an end-of-life (EOL) event.

During these slowdowns, manufacturers might reduce staff and curtail spending, particularly in research and development (R&D). This trend has been observed across various medical, industrial, automotive, and military/aerospace/defense sectors. These markets produce long-life products and do not require the large volumes of chips that are in demand by faster-moving sectors, like consumer electronics. Consequently, there is a decline in demand because business expenditures on R&D are largely funded through cash flow. As a result, companies prefer to maintain existing platforms instead of investing in new designs, which raises the demand for older, often rare or obsolete semiconductors.

As the average lifecycle of a semiconductor decreases to two years, while end products may last a decade or longer, it’s clear why maintaining older platforms can be challenging. Collaborating with an authorized distributor that has inventory or can provide extended manufacturing services offers a viable solution to the ongoing quest for those crucial devices that ensure product longevity.

Despite seeming counterintuitive, product shortages occur in the industry during both boom and bust cycles. Implementing smart sourcing strategies and maintaining strong partnerships with franchised and authorized distributors are wise practices throughout any economic climate. The bottom line? Purchasers must remain vigilant. It’s essential to monitor the budget for new designs, as a slowdown can indicate a potential rise in demand for older products. By staying aware of how market fluctuations influence supply, purchasers can become a company’s saving grace, even during challenging times.

To read the article on EPSNews, click here: https://epsnews.com/2024/10/28/align-with-the-boom-bust-cycles-for-semis/