Strategic Purchasing
Obsolete Parts Problem Eases—For Now

Obsolete Parts Problem Eases—For Now

Dealing with obsolete parts is not a new problem for electronics purchasers, but it is a continuing one. Each year semiconductor and other component manufacturers issue end-of-life (EOL) or product discontinuance (PDN) notices for thousands of parts. An EOL notice, which can contain dozens of part numbers, states when production of the parts on the list will cease.

Component manufacturers stop producing semiconductors and other components when demand for the parts weakens and the business is no longer profitable.

Component obsolescence affects all industries, but is especially an issue for those that build systems that have long product lifecycles—such as defense and aerospace, medical, and automotive, which build systems that can be manufactured for decades, long after components needed for the equipment are being produced.

The good news for buyers is that the number of EOL and PDN notices has been declining in recent years. In 2015, researcher IHS Technology forecasts that about 3,900 EOL and PDN notices will be issued. That's down from about 5,700 issued in 2013. Greg Wood, director, parts content for IHS Technology recently told me the number of EOL notices is declining for two reasons.

“One is [that], month-over-month, semiconductor companies have seen growth over the past 25 months,” he said. Demand for semiconductors has been strong and manufacturers “are selling the components and there is no reason to end-of-life” many parts, he added.

The other reason is the European Union’s Restriction of Hazardous Substances law, which went into effect in 2006. The law restricts the use of lead and four other substances in electronics. Prior to the law, many electronic components contained lead, but once the law went into effect manufacturers gradually stopped making parts with lead and issued EOL notices for the discontinued parts.

Today, most parts that contain lead have been discontinued; only about 5% of the components sold contain the metal, and fewer EOL notices are being issued for discontinued leaded parts.

Although the number of parts being discontinued has declined in recent years, the trend will likely be short term. The number of discontinued parts will rise in the near future because component obsolescence tends to be cyclical.

For instance, in 2005 the number of EOL and PDN notices totaled about 2,200. That figure increased to 3,500 in 2006 and then dropped to 3,200 in 2007. By 2010 the number of notices totaled more than 5,000, but declined in subsequent years and will drop to below 4,000 in 2015, according to IHS.

History will likely repeat itself and the number of components that manufacturers discontinue will rise.

Buyers need to be proactive in managing component obsolescence. Of course, buyers need to keep track of EOL notices, but they should also watch for “not recommended for design” notices from component manufacturers. Such documents are an indication that manufacturers will soon discontinue production of the components in the notice.

What’s more, buyers involved with design must make sure that parts that are not recommended for new designs never make it on to the bill of materials of new products. They should also make sure that parts used in new designs have alternative sources or part substitutes whenever possible.

“If you have an opportunity to select parts that have alternatives or drop-in replacements from other manufacturers, then you certainly want to do that,” Wood said.

If a last-time buy needs to be made, buyers must make sure that the number of parts in the last-time buy order is accurate. If the number of parts listed in the last-time buy is too high, the buyer’s company may get stuck with a lot of old, obsolete parts. If the forecast is too low, a purchaser may need to buy parts from independent distributors or component brokers—and may end up paying significantly higher prices.

Another important note: Buyers purchasing obsolete parts on the open market should first qualify independent distributors to make sure that they have quality systems in place and have not sold substandard or counterfeit obsolete parts in the past. Independent distributor should also be able to trace parts back to the original component manufacturer.

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