Obsolescence Management Challenges for Users of Semiconductors Peter Marston Business and Technical Consultant Dan Deisz Director of Design and Technology IIOM Conference June 2017 Inventory Distribution Product Manufacturing Manufacturing Services
Obsolescence Management Challenges for Users of Semiconductors Agenda Semiconductor Importance to the Electronics Industry Semiconductor Industry Consolidation Market Segment Focus of Mergers & Acquisitions Product Fallout Winners & Losers Obsolescence Impact Counterfeiting Impact Challenges Summary
Semiconductor Importance Without semiconductors where would the electronics industry be today?
Semiconductor Market Segments
Semiconductor Industry Consolidation All industries undergo consolidation as they mature The semiconductor industry has been in existence for more than 60 years Mergers and acquisitions have taken place over this time but there has been a major acceleration of activity in the last 24 months
Semiconductor Industry Consolidation
Semiconductor Industry Consolidation 2015 Altera Intel Freescale NXP Broadcom Avago Atmel Dialog? International Rectifier Infineon Micrel MicroChip PMC-Sierra Skyworks EZChip Mellanox Pericom Diodes IBM Micro Global Foundries Fairchild ON
Semiconductor Industry Consolidation 2016 Atmel purchased by Microchip ARM purchased by Softbank of Japan Linear Technology purchased by Analog Devices Cypress Semiconductor and Toshiba up for sale Infineon buys Wolfspeed (2017 input = maybe) STM buys parts of AMS Fairchild Semiconductor purchase by ON Semiconductor completed Renesas buys Intersil Qualcomm buys NXP ADI buy Innovasic Lattice purchased by Canyon Bridge (US based Chinese private equity company M/A Com buys Applied Micro Infineon buys Innoluce Teledyne buys e2v Toshiba?? Announced since September 2016
Semiconductor Industry Consolidation Why is this happening now? Inexpensive Capital Cash on hand at many of the larger companies Many chip stocks are historically undervalued Smaller companies struggle to compete; R&D to keep up with technology coupled with volume sales are required to keep profit margins up Only 4 companies able to afford 14nm (Intel, TSMC, Global, Samsung) SMIC not too far behind To Focus on growth markets of IOT, Datacenters, Automotive, and Consumer
Market Segment/Product Focus Datacenter Silicon Processors (Intel) SSD Disk Drives New memory architectures (Intel/Micron 3D Xpoint vs. HP/Sandisk Memristor SCM technology) Spinning Disk Drives (Seagate, WD) Connectivity (Mellanox, Skyworks, Broadcom) Power Management (TI, Infineon, ON) Automotive Sensors (Renesas, Infineon, NXP, ST, Infineon) Microcontrollers (NXP, Infineon, TI, Dialog) Power Management (TI, Infineon, ON) Consumer and IoT Sensors (Sony, ADI, NXP, Infineon) Processors & Microcontrollers (Nvidia, Qualcomm, Intel) Smart Cards (NXP, Infineon, Samsung, ST) Wireless (Broadcom, TI)
Potential Obsolescence Impact Massive semiconductor market consolidation brings product-line consolidation and/or elimination. Profit margin differences between merged/acquired companies put stress on the lower margin products. Intel was at 65% when acquiring Altera at 55%. An acquiring company needs to finish identifying Synergies within 2 years or the odds of a successful acquisition diminish 1 year to complete the reorganization and announce updated product plans PDN s start anywhere from 18 months to 2 years after Day 1 PDN s allow 6 months to 1 year to get last-time buys in place Final product ships are typically 3-4 years after Day 1. Product lines can be discontinued because of revenue, silicon, packaging, and/or test platform reasons PCN/PDN activity could easily be 3-4x prior years and no BOM analysis tool is going to predict this
Potential Obsolescence Impact Intel Altera: to focus on Datacenter Silicon Support for silicon not fabricated at Intel? Already a massive EOL notice from Altera Independent entities until? Management structure? Qualcomm/NXP/Freescale: to focus on Automotive & IoT Future of PowerPC and 68xxx at Freescale? Especially with Qualcomm SnapDragon and commitment to ARM Fab and product line consolidation? NXP sold off standard products to Nexperia 1 quarter 2017. Avago Broadcom: to focus on Networking Avago aggressively drives cost/profit: culture differences, layoffs? Very large portfolio likely to be consolidated? Management Structure? The final management structure for an acquisition will impact which products continue.
Product Fallout : Winners & Losers Winners Automotive Market Segment ARM processor architecture SSD memory architectures (new) Power Management Losers PowerPC processor architecture 68xxx product architecture Older products run on internal fabs and at foundries Non-SSD memory architectures Military Segment Leaded package options Any product in higher pin-count DIP, PQFP, PLCC packages
Packaging Fallout Older Leadframe Packages Packaging obsolescence: DIP 40-pin first, followed by others PQFP Higher pin count (e.g. 240-pin) first, followed by others Flip-chip BGA substrates are unique for each design! Leaded options Product and package obsolescence is a significant EOL driver and presents new challenges to the industry
Obsolescence Management Challenges for Users of Semiconductors Industry consolidation presents new opportunities for counterfeiting Redundant equipment Knowledgeable employees, especially at subcontractors many in questionable locations (IP theft, Trojans**). Surplus inventory from product obsoletions ** See: Invasion of the Hardware Snatchers: Cloned Electronics Pollute the Market Article by Mark M Tehranipoor, Ujjwal Guin and Swarup Bhunia, IEEE Spectrum - 24 April 2017 Increased counterfeit risks
Obsolescence Management Challenges for Users of Semiconductors Solving obsolescence (and avoiding counterfeits) Obsolescence will happen and management is key for all long term electronic applications Select suitable semiconductors from the right manufacturers at the design stage Where appropriate/possible have a technology refresh plan Have a counterfeit awareness/avoidance policy don t rely on industry mitigation standards to guarantee avoidance.
Obsolescence Management Challenges for Users of Semiconductors Rochester Electronics can help electronics equipment manufacturers and users with semiconductor obsolescence and ensure counterfeits are avoided
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Summary Market segment focus and the need to scale were significant drivers for the 2015/2016 semiconductor M&A activity. Semiconductor OCM consolidation is already impacting product availability. Package obsolescence is part of the fallout (e.g.40pin DIP almost extinct). PCN/PDN activity could easily be 3-4x prior years and BOM analysis tools unlikely to be able to predict this Partner with an appropriate semiconductor supplier BEFORE obsolescence (where possible). Select the right product/packaging at the design stage Improvise, Adapt and Overcome! Be Aware of the Counterfeit Dangers
Thank you and Questions?