Semiconductor shortage is already changing product design, for the better

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Article by: Peggy Carrieres, Avnet

Price increases, technological advancements and inevitable supply chain disruptions will lead to long-term radical changes in the semiconductor industry.

A year later, how have manufacturers adjusted to the continuing shortage of components? What are the prospects for 2022? What strategies would improve the resilience of manufacturers’ supply chains? These and more in this month’s In Focus series.


There is no doubt that the pandemic has had an extraordinary impact on the semiconductor industry. Nonetheless, it is important to remember that this disruptive event actually amplified the existing problems. Long before news of the current chip shortage hit the headlines, several major changes in the industry were brewing and will have long-term implications, especially for supply chain professionals.

Take the developments in 5G and electric vehicle infrastructure. The requirements led to an increase in demand for semiconductors before 2020. Then, when automakers tried to catch up on orders after a wave of cancellations at the start of the pandemic, it created a ripple effect on the market. entire product life cycle.

The semiconductor industry is complex and cyclical, and supply chains are inherently vulnerable to the vagaries of supply and demand. To assume that such problems will go away quickly after the pandemic resumes would be wrong. They’re here for the long haul – and that’s not necessarily the worst news.

Higher prices will accelerate innovation

Given the current supply imbalance, recent price increases for some electronic components come as no surprise. But even as parts become more readily available, we’re unlikely to see a return to pre-pandemic prices. This is due to the simple fact that producing parts is more expensive. Labor costs are on the rise, as are the price of raw materials. Exacerbating the situation: Semiconductor companies are not ramping up production to the level seen in previous cycles, mainly because they are concerned about capital spending and the speed of technological change.

With constant pressure to control costs, OEM design engineers will continue to strive to optimize the footprint and number of components in their designs, both at the board and system level. In response, suppliers will step up their innovation efforts.

There will be continued progress in the integration of semiconductor devices. And systems development in a package will continue at a rapid pace, driven by the same imperative to fit more capability into smaller footprints and the desire for everything to be “smarter.” Impressive levels of integration are showing up in almost all types of devices today.

For example, companies developing sensor technology are going beyond simple smart sensors, which combine sensors and processing capabilities into a single device. We are now starting to see capabilities such as AI processing built into a single sensor box, which could house a dedicated DSP for AI signal processing, memory for the AI ​​model, and a control circuit. conventional image sensor. By including AI processing and sensor algorithms in the same package, vendors see this level of integration not only as a way to reduce the number of components or add sophisticated functionality, but as a real benefit. competitive.

As engineers seek to find cheaper ways to add features and capabilities to their products, the number of software-driven features and capabilities will also continue to proliferate. A first notable example is software-defined radio, where the work of filtering through a multitude of tuned circuits is primarily done by software. Emulators, which allow a computer system to behave like another system, also use software instead of complete sets of hardware.

Supply chains: challenging the status quo

These ongoing technological changes will bring a new level of uncertainty to the mix. How quickly will these changes evolve? What impact will they have on a nomenclature? Will there be fewer components circulating in the supply chain? The only certainty is that innovation will lead to more changes, which will have a ripple effect over the entire product life cycle.

The importance of the design chain at the head of the supply chain has never been greater, magnified by the shortage of parts. In many applications, there is simply no one perfect replacement part. At Avnet, we are already helping engineers who are forced to redesign their boards to accommodate parts with better uptime. In some cases, they had to go through a whole recertification process to ensure that the end product performed according to specifications.

Businesses are now finding that if you don’t put multiple sources on the BOM, it’s really going to sting them in the background, especially given the increasing time-to-market pressures.

Businesses are also rethinking the inventory status quo. For example, companies are realizing that they can no longer arrive at exactly when they need the part and that there are serious drawbacks to relying solely on a just-in-time inventory strategy. This shift in perception of inventory as a liability to inventory as an asset occurs because OEMs recognize that when they don’t have a $ 2 coin, they won’t be able to ship their product at $ 70. $ 000. This is where the role of the distributor comes in, whose job it is to keep inventory for customers. We act as a buffer for the industry.

Attention is also shifting from price to ensuring supply, and the need for a supply chain strategy that has the resilience to respond quickly to the unexpected. Companies are looking to reorganize their supply chains, leveraging insights gained from data and market intelligence to gain greater visibility across the entire product lifecycle. We are already hearing more and more from clients who need trusted partners with distribution expertise to help them in planning, forecasting and developing risk management strategies. This will lead to significant advances in the supply chain and allow businesses to be better prepared to deal with future disruptions. More importantly, it will keep them more focused on technological development and less on supply issues.

About the Author

Peggy Careers is Vice President of Global Sales Activation and Supplier Development at Avnet.

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