At the surface level, the current state of the semiconductor industry appears tenuous as excess inventory in the OEM and EMS markets suppresses new orders. However, the industry’s been here before. The Semiconductor Industry Association reports that the industry’s recent downward trend is consistent with the industry’s forecasted cycle. Historically, the semiconductor industry has always gyrated around shortage and excess markets.

“The market is expected to recover in 2024, growing 16.3 percent to reach $562.7 billion,” said Gartner VP Analyst Gaurav Gupta. Currently, the semiconductor industry is feeling the “hangover” effect of a famine-to-feast market. The most recent shortage caused companies to purchase buffer stock as they were afraid of not having future access to the product. This is known as the bullwhip effect and is largely why the semiconductor industry has too much inventory.

Another reason for this excess is customers are incentivized to order in higher volumes than they need to get a price break on components. Semiconductors have long lead times and are expensive to produce so it’s most cost-effective to manufacture them in high volumes. Per Forbes, these economies of scale, combined with companies jockeying to be competitive, have greatly contributed to the market.

Obsolescence management

As the excess market corrects, chip companies that have committed to new fabs will begin rolling out their latest semiconductors. This has major implications for obsolescence, as a variety of legacy products will transition to end-of-life (EOL). This means managing obsolescence should begin sooner rather than later. Getting caught without a critical component can be incredibly costly.

A lack of sourcing options for obsoleted parts in the supply chain can result in long delivery delays or production lines being halted entirely. These obstacles cause financial loss for all parties involved. An intelligent way to mitigate such loss is investing in obsolescence management services. Many electronic component distribution companies, such as Converge, offer a variety of supportive obsolescence management services and solutions to help companies better navigate obsolescence. Sourcing rare components, ensuring components are compliant with regulations, forecasting potential disruptions, and inventory management are all services these companies provide.

Future of Obsolescence Management Community

Converge’s Future of Obsolescence Management (FOM) community is an international network of individuals and organizations who seek to collaborate to find solutions for present and future challenges in obsolescence. The FOM community will be holding its conference September 6 – 7. The theme of this year’s event is “Regaining Control in the New Supply Chain.” FOM2023 Boston offers attendees the exciting opportunity to hear from leaders from varying industries and take part in a highly interactive Solutions Day. Hosted by SiliconExpert, the Solutions Day will feature five interactive building blocks that will cover strategies to “Build an Intelligent Supply Chain.”

Even in an Excess Market, Plan for Obsolescence