A declining supply and steady demand always creates problems. As low-priced COTS parts became obsolete, Mil/Aero OEMs and contract manufacturers (CMs) scrambled for any remaining parts. Sometimes, they found the ICs on distributor shelves or with suppliers dedicated to obsolete parts like Rochester Electronics. Other OEMs turned to the “Grey Market” for parts. Actually, before COTS, there was not much of an IC grey market. After the move to COTS parts, a widespread grey market developed to supply older obsolete parts to the unfortunate CMs and OEMs seeking the one critical part needed to complete a build.
Another unintended consequence of the obsolescence of COTS parts is the rise in counterfeit parts. From a recent article:1
1. Over 50 percent of counterfeit parts are obsolete, which is a key reason for counterfeiting.
2. Of the counterfeit parts, 25 percent are analog ICs. The reasons for this are well understood: the high ASPs of the valid part; the long life of the original devices combined with their wide market appeal; and analog devices are much easier to copy than highly complex digital devices.
The IC industry responds
With IC obsolescence a fact of life in the modern COTS-driven world, how can IC manufacturers, their CMs, and Mil/Aero OEMs manage supply and demand today? There are several things that an IC supplier and Mil/Aero OEM can do. We will consider three possibilities.
Last-Time Buy (LTB)
When an IC manufacturer announces a LTB of designated parts, the Mil/Aero customer can make a final volume buy. Sometimes this is the OEM’s only recourse, especially on the short term, to obtain the crucial remaining parts for an application.
There are “pros and cons” for the Mil/Aero OEM. On the positive side, the OEM buyer can stockpile the parts needed for the expected remainder of the program life (hopefully). Moreover, the buyer knows that these parts come directly from the manufacturer and are “the genuine article,” not counterfeit.
This is, however, an expensive and risky investment. Financial capital needs to be committed up front to procure all the available devices but there is no guarantee that they will all eventually be needed. Additionally, all the parts will have a single date code (the date on which the parts were assembled into the packages). In future years the OEM manufacturer will be using parts with date codes from the LTB date which could be years old as time progresses. Moreover, solderability and moisture intrusion/contamination will be real issues and a direct result of the care taken in storage.
The grey market
In some instances, a Mil/Aero OEM cannot acquire enough needed parts in the LTB procurement, which will force them to look to the grey market. The grey market—I cannot think of any reason to go to the grey market. The risks are just too high. Nonetheless, some companies do use this option. What should they expect?
When purchasing from the grey market, a Mil/Aero OEM must verify part authenticity by making sure that there is an unbroken chain of possession for the parts to verify authenticity. Otherwise, there is the possibility that the parts are counterfeit. This can occur even when a CoC is provided. CoCs are fairly easy to copy and there have been cases where a copy of a valid CoC is used to pass off multiple lots of questionable parts.
A new design
If the prime/CM cannot obtain genuine replacement parts, they will be forced to redesign and requalify their board. Added to this will be a delayed delivery of the finished product to the end customer.