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IHS Markit's Insights and Recommendations Regarding the Global Chip Shortage

IHS Markit's Insights and Recommendations Regarding the Global Chip Shortage

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IHS Markit, a global information provider, recently conducted a webinar called “Component Challenges 2021,” focused on the global semiconductor sector.

The presentation delved into the impact of the worldwide chip shortage and its downstream implications. It echoed sentiments expressed by industry leaders indicating the crisis will persist into 2022. It also highlighted a recent rise in end-of-life (EOL) and product change notices that could disrupt the near-term availability of certain electronic components.

In addition, the group offered some recommendations that it believes can help OEMs navigate the instability affecting the field.

Chip Shortage and Component Obsolescence

IHS Markit’s component challenges report began with an in-depth look at the impact of the global chip crunch.

The organization determined the crisis prompted lead times to increase for 85 percent of semiconductor types across the industry. It found 26 percent of manufacturers it surveyed increased their turnaround windows by more than 10 weeks. It noted for peripherals like microcontroller units as well as telecom, consumer, memory, as well as interface ICs have been most seriously affected.

The information provider also estimates the electronic part shortfall would cost the automotive industry $60 billion this year.

The group highlighted the challenges OEMs would face because of an uptick in component obsolescence and product change announcements. It noted an outmoded part trend has emerged in the oscillators, resonators, crystals, and optoelectronics segments recently. Moreover, it found a higher than normal incidence of chip carriers, circuit protection devices, and passive filters going EOL.

The organization does not attribute the development to any single catalyst; instead, it is the result of multiple factors.

In some instances, manufacturers have updated their catalogs to remove aging components and align with shifting end-market demand. Other vendors have stopped offering select electronic devices because of changes in circuit board designs. And others have modified their output following improvements to their manufacturing processes and supply chain relocations.

Thankfully, the semiconductor shortage and increasing EOL activity will not be ongoing sources of disruption for the electronics industry. Chipmakers' efforts to expand and diversify the production capacity will greatly lessen their impact on the sector. But until those infrastructural solutions are put in place, OEMs need to embrace new methodologies to overcome their immediate challenges.

IHS Markit’s Best Practice Recommendations

IHS Markit devised a few best practices recommendations for firms looking to navigate 2021’s most daunting sourcing challenges.

The group has three procedural modification suggestions for OEMs interested in mitigating the impact of semiconductor shortages. First, it advises that companies make their part acquisitions in advance of manufacturing and increase their stockpile of crucial components. It also proposes that professional buyers carefully monitor shifts in lead time to adjust for unexpected delivery delays.

Lastly, the intelligence provider counsels OEMs to form close relations with their suppliers.

For product obsolescence, it recommends that firms create designs that utilize parts with crosses from multiple vendors. That will enable companies to ensure their NPIs launch on schedule, even if one of their semiconductors enters EOL. It also underlines the importance of keeping close tabs on product change notifications to head off potential disruptions.

Given the widespread volatility currently affecting the global electronic components marketplace, lead time delays and unexpected availabilities are impossible to avoid. But IHS Markit’s best practice suggestions offer a way to move into a more stable future.

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