Wednesday, April 17, 2013

Semiconductor Companies can Transform with the End of EOL

While it makes economic sense to End-of-Life devices it’s not without direct and indirect cost to the semiconductor manufacturer or to their customers.   The solution to this is to end EOL and move to a Mid-Life Transition.

Large semiconductor companies (semicos) are challenging businesses in many dimensions.  In many ways they lead the global innovation engine.   To the marketing strategist the cool part of the industry is understanding the market dynamics and trends to determine what device will be needed in two years.  (The median time to fully bake a complex device).   To others the cool part of the industry in managing the entire complex supply chain.    From wafers, to packaging to test to warehousing to shipping and all the steps in between is a daunting task. Multiply this by the number of devices a manufacturer sells, perhaps many thousands, and it’s clear this is truly a daunting endeavor, One I personally am glad there are armies of professionals to deal with so I can focus on what device is needed in two years.

Given this daunting endeavor it must be challenging  to determine when to end-of-life (EOL) a specific part.  Not everything has a life cycle of less than a year like cell phones.  The semico’s goal is to maximize the ROI of each device.  Yet will circuit designers hesitate to specify a part if they think it’s been around for a while and may be near its EOL?  Redesigning a printed circuit board is also a costly process.  

Yet semicos’ have a finite capacity along the entire supply chain.  Given the nature of the manufacturing process making small volumes is not an option.  Publically traded companies also have to concern themselves with the inventory line on their balance sheet.  Historically, semico’s move parts to the EOL phase of the life cycle.  This “final” phase of a device’s life may take years to achieve.  The supply chain, as noted, is a well hone global process.  EOL devices create an exception.  No longer can they be part of this traditional process.  A special supply chain process is created for them.  Exceptions to any process create cost.  Plus, catalogs and marketing materials, both paper and on-line, need to be amended or removed, sales teams need to be trained, and most importantly customers must be notified that the device is being phased out.  What’s old to you may be new to them.

In the simplest case where there’s a pin-for-pin replacement the customer is still impacted.  Their supply chain needs to be modified as well.  Engineering documents must be changed, bill-of materials updated, and manufacturing schedules altered.  It’s more costly when the “new” device isn’t a pin-for-pin replacement. 
The solution to this problem is to “End EOL” and to change the paradigm to one of a Mid-Life Transition.  Companies such as Rochester Electronics (Newburyport, MA) can be integrated early in the process to become strategic extensions of the supply chain.  These companies manage this transition to provide this seamless transition.

 Any transition will be more successful if there is continuity during the process.  To assure this during the Mid-Life Transition semico’s should make Rochester, et al, an integral part of their supply chain.  No longer is EOL an abrupt event, rather it become a seamless transitions.  No longer will EOL be a troublesome exception to the well-honed supply chain.  Rather, it will be another well-hone path. 

The End of EOL and the transition to Mid-Life Transition benefits everyone involved in the industry.  No longer are disruptive and costly events incurred by the semico or by their customer.  No longer are your devices and intellectual property being traded around the world in the proverbial dark alleys like illicit substances.   The end of EOL is a transformational event for the industry. 

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