As Stephanie Yang argued in a recent Wall Street Journal article, “What’s Worse Than a Chip Shortage? Buying Fake Ones”. Asked and answered. But the truth is there’s more to it than just counterfeit devices out there. There are old, badly stored and damaged devices floating around in the market as well as fakes – and the pandemic has made the problem worse.
How did we get here and what can be done about it? The COVID-19 pandemic seriously disrupted both ends of the supply chain, production and demand. In some industries, like automotive and avionics, demand was so seriously impacted that scheduled orders were cancelled and capacity building slowed or even stopped. Fast forward to the robust post-pandemic recovery and suddenly demand has not only risen to pre-COVID levels, it’s substantially exceeded them. Meanwhile the pandemic boosted the demand for laptops, tablets and gaming stations, adding to the already growing requirements of new products like EVs (Electric Vehicles); you can see why demand for electronics has skyrocketed.
The semiconductor industry can’t turn on a dime and add capacity fast enough. What’s more, semiconductor foundries are under pressure from their customers and from governments to stand up new capacity in new geographies, not just to correct the supply and demand imbalance, but also to protect supply chain security in key locations, like the US. Indeed TSMC and Intel
The truth is there are just not enough chips for everyone and this isn’t going to improve in the short term. In the last few days I have talked to several EMS companies who have said they are expecting this crisis to run well into 2022. This presents two problems. The first is the obvious shortage of devices; the second, equally important, is the issue of bad actors trying to take advantage of the situation by offering components of unclear origin on the grey market.
This problem is both urgent and potentially long lasting. What should manufacturers be doing to respond, to ensure they are able to maintain quality and traceability?
Better supply chain management is a great place to start. Full traceability in the supply chain should already be in place but that can be hard when parts are coming from brokers or other players in the grey market. Investigation into those vendors is essential to mitigate risk. This week I spoke to an EMS executive in the Americas who had received good devices in fake SSD packaging; while the devices turned out to be perfectly fine, the fake packaging clearly rang alarm bells and required investigation.
Once the devices enter the factory, you need careful quality control to prevent production from being adversely impacted by damaged, old, badly stored parts or fakes.
Some companies are offering great technological solutions to check and inspect devices in the manufacturing environment. Goods inwards teams can use x-ray inspection from companies like Creative Electron, who have for years been selling counterfeit detection x-ray equipment. Creative Electron founder and CEO Bill Cardoso explains, “sales of counterfeit detection devices have been growing substantially for years. A good component inspection strategy has always been essential, right now it’s essential and urgent”. It seems these supply chain shortages always attract bad players, and better component supply chain detection is a good long-term investment.
Cybord have recently launched an AI driven system to inspect all component types, be they semiconductor, passive or connectors, not just when they arrive on reels but also on the placement machine, at line speed, checking all 100% of components placed. And that 100% is important. By checking on the line it becomes a scalable solution that, unlike sample checks or lab testing, inspects every single part when it is placed on the PCB.
What’s unusual about Cybord’s solution is that it requires no hardware installation because it simply uses the images produced by the placement head and AI driven software to detect anomalies; it can check for counterfeits, defects, solderability, tampering. Cybord’s solution is being utilized by an increasing number of both OEMs and EMS companies. Zeev Efrat, Cybord’s CEO explains, “our solution was already providing value to OEMs by protecting them from using bad devices and providing traceability data, now it is helping to safeguard them against the real and present threat.” Zeev added, “those with the system already in place are feeling pretty good at the moment, knowing that they have the granular level of data they need to protect their supply chain”.
These solutions won’t help you procure the devices you can’t get. They won’t reduce lead times. But they can prevent production failures and final product faults; and this is invaluable at a time when companies are stretched to the limit trying to ramp up production while managing disrupted supply chains. And backed by a much more rigorous detection system, buyers can buy in the open market with a little more confidence than they might normally have in these exceptional circumstances.