Chip shortages and fake chips from a distributor's point of view

Foreign media Evertiq recently released a series of articles, looking at the global semiconductor market from the perspective of distributors. In this series of articles, the media contacts distributors and sourcing experts of electronic components to focus on the current semiconductor shortage and what they are doing to meet customer demand. This time they interviewed Colin Strother, executive vice president of Massachusetts-based Rochester Electronics.

Q: The component supply situation has gotten worse since the pandemic, how would you describe the operation over the past year?

A: Supply issues over the past two years have disrupted normal delivery certainty. Manufacturing, transportation disruptions, and even natural disasters have led to supply chain uncertainty and extended delivery times during the pandemic. Component discontinuation notices have increased by 15% over the same period as the priorities of third-party fabs change and the industry refocuses fab investments in response to low-power batteries dominating the market. Currently, semiconductor market shortages are a common reality.

Rochester Electronics' focus on a continuous supply of semiconductor components fits well with equipment manufacturers' long life cycle requirements. We are 100% licensed by more than 70 semiconductor manufacturers and have an inventory of active and discontinued components. Fundamentally, we have the ability to support customers in need at a time when component shortages and obsolescence increase, and that's what we've done in the past year with more than a billion units shipped.

Q: In the past, during component shortages, we have seen more and more counterfeit components hitting the market. What is Rochester doing to respond?

A: The supply chain is experiencing increased demand and supply constraints; all market sectors are affected and some customers are under severe pressure to supply and have to turn to grey market or unauthorized dealers. The counterfeit business is huge, sold through these grey market channels, and ultimately penetrates to end customers. When time is tight and products are not available, the risk of end customers falling victim to counterfeit products increases dramatically. Yes, it is possible to ensure the authenticity of a product through testing and inspection, but it is time-consuming, expensive, and in some cases, still not fully guaranteed.

The only way to be sure of authenticity is to buy from an authorized reseller, which ensures the pedigree of the product. Authorized resellers like us offer risk-free sourcing and the only truly safe option to keep customer production lines running during shortages, distributions, and product obsolescence.

While no one likes to be fooled by counterfeit products, in the world of spare parts, sourcing one can be disastrous. It's uncomfortable to imagine a commercial airliner, missile or life-saving medical device having a critical component that is counterfeit and fails in the field, but these are all at stake and the stakes are high. Buying from an authorized reseller who works with the original component manufacturer eliminates these risks. 100% Authorized Distributors like Rochester Electronics show they are compliant with SAE Aeronautical Standard AS6496.

Simply put, they are authorized by the OEM to provide traceable and guaranteed products that do not require quality inspection or reliability testing because the parts come from the OEM.

Q: Which specific product group is most affected by the shortage?

A: The two categories most affected by supply chain shortages are general-purpose devices (multi-channel) and proprietary products where fewer alternatives exist. Such as power management chips and power discrete devices. In many cases, these products have multiple origins or have a close correspondence between different suppliers. However, due to their widespread use in multiple applications and multiple industries, supply-demand has been high, posing challenges for suppliers to keep up with demand.

MCU and MPU products are also experiencing supply chain challenges, but for other reasons. These two categories face design constraints with few alternatives, and suppliers face different product combinations to produce. These devices are usually based on a specific CPU core, embedded memory and a set of peripheral functions, specific packaging requirements, and potentially software and code can also affect shipments. Generally, the best option for customers is that these products are in the same batch. But we have seen more extreme cases where customers have to retool their boards to fit different packages in order to keep production lines running.

Q: How do you feel about the current market situation as we move into 2022?

A: The semiconductor industry may be known as a cyclical industry. Since the founding of Rochester Electronics in 1981, we have had approximately 19 industry cycles of varying degrees. The reasons for each cycle are different. They almost all start suddenly and stop abruptly. A key difference in the current market cycle is that it is not set against the backdrop of a booming global economy. In fact, on the contrary, in our current environment, predicting outcomes is even more challenging. Will it be over soon, followed by the inventory buildup we often see contrasted with weak economic demand, leading to a downturn in the market? Or will it be protracted and exacerbated by strong demand conditions based on the recovery of the global economy after the virus is overcome?

2021 will be an unprecedented year for the semiconductor industry, and the World Semiconductor Trade Statistics has predicted that the semiconductor market will grow by 25.6% in 2021, and the market is expected to continue to grow by 8.8% in 2022. This has led to component shortages in many industries. This year, Rochester Electronics continued to invest in improving its semiconductor manufacturing capabilities, particularly in areas such as 12-inch chip processing and advanced package assembly. Going forward, we believe that automotive electronics will be an important part of Rochester's strategy, and in order to deepen our commitment to providing customers with products and services of the highest standard, we have strengthened our quality management system.

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