Turn the chip shortage into a green opportunity

Why is there a chip shortage?

Several circumstances have resulted in the current chip shortage:

• The coronavirus pandemic, which increased the demand for IT and communications equipment
• Fires at factories in Asia 
• The container ship that became stuck in the Suez Canal.

Additionally, integrated circuits are becoming increasingly prevalent in many kinds of products. 

The chip shortage has caused headaches for many Danish and foreign businesses alike, as well as extended lead times for many products containing electronics.

However, this situation is not the first of its kind. Issues with the supply of chip components previously occurred after the 2011 tsunami that struck Fukushima Prefecture in Japan, where many such components are manufactured. 

Broadly speaking, the globally distributed nature of our supply chains has made us ever more sensitive. Consequently, many businesses are assessing ways to make their supply chains and manufacturing operations maximally robust.

There are no easy solutions to this challenge, but a variety of short- and long-term strategies and solutions are appearing on the market.

Short-term solutions to the chip shortage

One short-term solution is to require extensive forecasts from suppliers. 

The use of ‘second sources’

‘Second sources’, or alternative components, are another option, although using them comes with the need to evaluate additional suppliers. Additionally, any new component needs to be tested for differences in performance – even if its data sheet claims performance equivalent or superior to a component already in use.

With a bit of luck (or careful searching), you can find clear, unambiguous specifications for a critical component. On the other hand, they may be impossible to find. Even when specifications are available, there is still the risk that an alternative component will fail to meet unwritten requirements, perhaps involving secondary parameters. 

Ultimately, the product may need to be requalified, and a PCN (product change notice) may need to be sent to the end customer. In the worst-case scenario, the end customer may need to conduct its own requalification.

The grey market

Some components may only be available on the ‘grey market,’ and buying them from there takes plenty of extra research. It may not be possible to determine exactly what is being sold, and there is an elevated risk of being defrauded or receiving ‘fake’, low-quality components.

Some manufacturers have considered reusing ‘old’ components, such as components from discarded production runs. This is only an option if such components are actually available, and they must still be evaluated and qualified for continued use.

Changes to PCB designs

Sometimes, there may simply be no qualified replacement components. If this is the case, the design of the PCB (printed circuit board) may need to be modified to eliminate the critical components. 
That said, changing PCB designs is by no means a ‘here and now’ solution, since the new design needs to be developed and qualified.

Long-term solutions to the chip shortage

In the long term, we may need to think differently about forming close partnerships with key suppliers.

‘Just-in-time’ manufacturing may no longer be appropriate, and components may instead need to be kept in stock.

Find alternatives early and design modularly

Of course, identifying second sources for important components early on in development is also an option, and some mature businesses have already begun using this approach.

Accounting for the possibility of protracted lead times and refurbishment from the start, such as by using a modular design, is also recommended. This way, if a critical component becomes obsolete, only the module it belongs to must be redesigned.

The chip shortage: a challenge with circular opportunities

As mentioned above, a lack of components may mean that old components must be reused or circuits must be redesigned. This, in turn, may make it necessary to requalify components or assess their remaining lifetimes.

Despite that, it is worth noting that reuse and redesign can support a circular business strategy when they result in long lifetimes and lifetime extension opportunities. These are among the areas that FORCE Technology is focusing on in the performance contract project entitled ‘Long live products and materials.’