Supply Chain Strategy for PCB Designer

Zachariah Peterson
|  Created: October 19, 2022  |  Updated: December 4, 2022
Supply Chain Strategy for PCB Designer

Electronic parts shortages coupled with inflation has been affecting the electronic industry globally. Chris Cain our guest for today’s episode is a supply chain consultant and former VP at Keysight working on supply chain and supply chain products.

Chris will share with us his 37 years of experience and strategies to overcome electronic part shortages.

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Show Highlights:

  • Chris Cain briefly describes what supply management is, and his role as a consultant.
  • Chris explains what it means to tap into the “scale for the larger ecosystem” of electronic providers
    • Find alternatives and make some design adjustments where is possible
    • Look for parts that are very scalable like memory parts and FPGAs
    • Modular approach or designing for modules may also allow designers to have some flexibility
  • If you can't get the parts, you can't ship your working design–having an insight into what’s coming in the supply chain could help designers in their decision making
    • It pays to spend a little time keeping up with groups like IPC which does the groundwork of looking up the industry and what they think is coming
  • Chris warns designers about silk-screened sand, he added “never pay, until you verify”
  • Moving towards an open source model, Zach mentioned a recent article on All About Circuits which talks about companies transitioning their chip architectures to RISC-V to help them overcome some of these supply chain issues
  • What is supply chain resilience?
    • Fuel costs push up the cost of everything else it's related to and it's essentially an inflation driver
    • Avoid buying three year supply of parts, it’s smarter to focus on design flexibility and overall sourcing flexibility
  • What are the challenges involved with raw materials supplies for assembly?
  • The dark scenarios, the dark side, the disaster scenarios
     

Links and Resources:

Connect with Christopher Cain on LinkedIn
Watch a related Podcast episode: The Benefits of Diversifying PCB Industry Supply Chain
Read Chris Cain’s Latest Article: Maximum Usage to Improve Supply Chain Resiliency

Connect with Zach on LinkedIn
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Transcript

Chris Cain: 

You don't want to do too much future-proofing, because the future is hard to predict. But a little bit can go a long way. So you could do a modular design, you touched on it there where maybe you put a layout pads that not only for one package types, for multiple package types, or a package type that could be adapted.
 

Zach Peterson:
Hello everyone, and welcome to the Altium Ontrack podcast. I am your host, Zach Peterson, and today I will be sitting down and talking with Chris Cain, a supply chain consultant and former VP at Keysight working on supply chain and supply chain products. Chris Cain, thank you so much for joining me today.
 

Chris Cain:
Thank you. Delighted to be here Zach.
 

Zach Peterson:
So as a new guest on the podcast, I think it'd be great to get a little insight into your background. I know you had a long career at Keysight, so I think it'd be interesting to see what it's like to work there and probably whatever else you've done throughout your career.
 

Chris Cain:
Sure. To give a little bit of background probably when I think about my experiences in supply chain, supply chain is all about getting the right parts, at the right quantity, at the right price, at the right place in time. Okay, sounds simple, but of course it's far from that. And a lot of times supply chain professionals, and I've used titles like this, have the word strategic or planning because a lot of supply chain is about forecasting or trying to forecast the future.

And in general, when as a supply chain professional or managing a team of supply chain professionals, as I've done, you actually are right more than half the time, that's doing pretty good and you feel pretty good about things. Things get more challenging occasionally like they are in the last couple of years, and we'll talk more about that. And then your probability of success of predicting goes less than half, so less than the probability of chance. And then things become much more challenging. And so that's where you actually start to pull out a lot of tricks and tips and also start to work a lot more with your design partners because the choices that are made during design are absolutely critical to both near term and long term impacts on supply chain.
 

Zach Peterson:
Well, we do often talk about de-siloing around here and all team designer and frankly a lot of other tools that are out there in this industry and other industries are all about integration and de-siloing, and enabling that design to whoever else collaboration that you've just referenced. Some of the things I think that some designers might be familiar with in terms of planning for supply chain disruptions or trying to play CYA on supply chain disruptions, maybe looking at alternatives and selecting those ahead of time, looking at things like packaging footprints, things like this, trying to select those ahead of time. Maybe just avoiding the stuff that only has a single source altogether. Are those some of the strategies that are just really basic and there's much more to it once you get to the kind of scale when you're at a company like Keysight.

Chris Cain:
Mm-hmm. And there's also matters of scale that's usually important. The more scale you have, the more opportunity you have of continuing to get the parts that you want to get. But you can also tap into scale for the larger ecosystem of electronics providers. So it pays even as a small individual developer or even as a hobbyist or somebody that does this for fun, to really tap into the bigger, broader rivers of supply chains. The bigger they are, the more you can tap into and you probably can fish off of that supply chain and get your needs met or find maybe more ready alternatives with a bigger supply chain. So it does pay to, as you said, use the tool sets, the information available to try to tap into where the supplies are there both now and in the future. That's the trick.

Zach Peterson:
Well, so when you say tap into the bigger supply chain and feed off of that, what exactly does that mean for the individual developer? Because I think the individual developer or the individual designer, they're going to go on to Digi-Key, Avnet, Mouser, one of those types of places. Especially if they're working on a prototype for a client and they really are on the front end doing that portion of the design, that's most likely where they're going to order from first. But if they're working in a long term capacity, like I do with a couple of clients and you need to help plan to get them to scale, what do you do? I've been able to go direct to vendors for some of the critical parts and set up that relationship with the client and they're able to get those 10,000, 20,000 units at a time when they need them. But what are some of those other ways to be able to tap into that much larger section of the supply chain that I think is hidden from the individual designer?

Chris Cain:
That's a good question. It pays to where you have the opportunity, of course an individual designer, even one at a large company doesn't have time to do this on every single part, but there's a lot of judgment involved it. And usually designers have a good idea of the parts that are going to be more critical, they're the ones that are that more complex parts, the ones that are typically consumed in lower volume just in general. But what you want to do is to maybe not only pursue the parts that are in common, high use but also find variance of those. Sometimes you can go with a slightly bigger or lower spec and find that there may be a big jump in quantity consumed worldwide. And if you actually make that shift in your design, you may find yourself tied to a much bigger supply chain that maybe there are alternatives available.

Whereas some of those smaller quantity parts, they may be very similar, they may be slightly less speed, slightly different temperature range or different operational parameters. But if the volumes get low, especially now where there's such constrained supply, a lot of the vendors make choices every day about what they make next and they're more likely to make more parts they're going to make more money on, which is going to be a combination of both margin on the parts and also volume. And so if you get caught on some of these lower volume parts, even though there may be one quite similar, that's where you have some play that you can move with. In fact, I've had designers more recently and the current challenges take a look at their designs and maybe find one with a slightly different temperature range, slightly lower. They picked one that had a very wide range, let's say over 120 degrees C at the top end. But for it's for a design that's used in a product that maybe you only need to type into a hundred. And then that exposes a whole different supply chain set of parts.

So that's where it helps us to be a little bit flexible in some of the requirements that may or may not be critical to your design, but may give you a big jump in capability. And then there are parts that are very scalable, like memory parts and FPGAs and whatnot. And there can be huge differences in the supply availability either because of the volume currently consumed or the age of the part. So you want to be careful to also look out for parts that, especially now, maybe at the end of their life. And that's a little hard for designers to see, but that's where some of these experts and some of these communities and some of these tools can give you some insight saying, "Ooh, let's be a little bit careful. They've announced that they may not make that part in two or three years. And so you may want to factor that into your decisions."

Zach Peterson:
Well I'll tell you, I have regularly gone for the over design route when the desired part is out of stock, that one MOSFET that was chosen, you just pick the next part number up and it has an extra 10 amp current rating or whatever and it's like, "Yeah, it's fine, go with it."

Chris Cain:
Exactly.

Zach Peterson:
I think however, if you're talking about a large processor or some specialty integrated circuits, then you have a cost issue. You don't want to move your price point too much by doing that because if it's a resistor, it's pennies. If it's a MOSFET, it's maybe a handful of pennies, but it's still pennies.

Chris Cain:
Could be double digit percentage of your overall bond cost. And then that's substantial. That's substantial.

Zach Peterson:
Sure. Yeah. I'll just give you an example I've dealt with. Network processors, you go from one part number to just the next one up or the next variant up, that could be 20 bucks a unit that you then have to add to your BOM and of course that gets passed on to the end customer. And if it's a thousand dollars end product, an extra 20 bucks isn't going to make a big difference, but if it's a $50 end product, now that extra $20 makes a real difference.

Chris Cain:
And you're exactly right, Zach. And there are tools there that designers can use. For example, you could do a more modular approach. So instead of designing for specific microprocessor part or component, you might actually design for a module that may be more expensive because you'll have extra connectors and there'll be Z axis things you'll have to deal with. But that may buy you into some flexibility because if that's a standard interface like a COM module, then you could pick... Now again, there are supply chains for the programming of these things. Those aren't cheap either and those have to be considered, but at least you can make a switch without maybe having to even relay out the hardware on your board. And so thinking about those alternatives and playing through those scenarios are a key thing for those key components.

I've had designers, especially when you think about a design that may last in some cases for test and measurement products that I've led, they may last 10 or 20 years. Unusual lifetimes. You see that in aerospace, defense, healthcare products. And in that case it may pay to actually lay in a little bit... You don't want to do too much future proving because the future's hard to predict, but a little bit can go a long way. So you could do a modular design, you touched on it there where maybe you put a layout pads that not only for one package types for multiple package types or a package type that could be adapted.

I know I had teams that were making a lot of adapter package assemblies so they could adapt like a MOSFET from one package style to another. So you could... Because you couldn't find a drop in replacement in terms of the form of the part, but you could find a drop in replacement for the functionality of the part. And so in that case for memory, for CPUs, for other components, it may make sense to maybe architect those in a modular fashion looking ahead to give yourself some flexibility.

Zach Peterson:
Yeah. So I guess the takeaway from what you've just said is once you get to the type of volume where you may have to cobble together designs with multiple packages, multiple footprints, multiple variants, that's really going to lead and influence a lot of the design issues, not just on the main board, but now you're talking about we may have to have a variant for module A, B and C. We may have to have a variant that is going to accommodate or leave enough room for this little adapter that we now need to solder on to the board and anything in between. Is this the type of thinking that a lot of companies do behind the scenes? Because when you buy a unit off the shelf, even if you're an electronics engineer, you probably don't crack it open and look at it. And even if you did and you saw something, do you have 10 others nearby to actually compare it with? I think at the end of the day as a user of the product, you just don't care. If it works, it works.

Chris Cain:
That's correct. And actually one of the things I found, it's interesting, this holds true for software development as much as hardware, we're very reluctant to make a change. There was a product line that I had teams that worked on that, it was a 30 year old design and there were like 60 plus lifetime buy parts and it was super high risk at that phase, but they were very, very reluctant to relay out the boards. They kept trying to do it by component changes, limited component changes. Unfortunately you push that too far and it's like anything, you push it too far, then it's like well that's actually making it 10 to a hundred times harder. So once we relaxed, we said, "Well actually customers only care about the entire instrument, not the 20 some printed circuit assemblies that are in this instrument." So what we said "The instrument had to be drop in replacement, added to function identically. But the PC boards those could change. But as long as the instrument function."

Once we relaxed those design constraints, then it opened some things up and it turned out it wasn't that hard to relay out all the boards, eliminate all of the lifetime parts and keep a product going that's been going for over 30 years, which is an amazing run for an electronic product. So sometimes you have to step back and look at things both at the component, the subassembly or even the whole product level and break some assumptions that gives you some design flexibility. Now you could say that's catering to supply chain, but honestly if you can't get the parts, you can't ship your working design. So it's pretty important to be able to do that.

And right now there's a lot of constraints because of the pandemic created a lowering demand and then getting to the endemic phase, it unleashed everything and everybody wanted to buy a lot of electronic stuff and certain industries saw almost an exponential move. EVs, there has been a huge shift to EVs now, we all saw it coming, but that shift really exacerbated the supply chain challenges, especially around microprocessors components that were used in the automotive industry. And that's created this enduring supply chain challenge that I think we're starting to see some signs that it's easing a little bit, but honestly it's not only going to be with us for a little while, but it's fundamentally changed some things.

I was starting to see some vendors that I work with essentially say, "We're just not going to make those kind of parts anymore because we can make more money making these other parts." So you have to look ahead a little bit. That's the prediction part of supply chain management and getting that insight of what's coming. And right now it's just been accelerated because people see different opportunities to make money and they're seizing those quite naturally. But it also means, in some cases you'll see the part you've been using for five, 10 years is suddenly poof, it's got a three year lead time, three year lead time usually means we're probably not going to make that anymore.

So you have to take that into account and then think about, "Gee, what should I do to work around that?" And so there's that strategic thinking and that's where it helps to work... There's some groups like IPC, standards groups, consortiums, that they do all the groundwork of looking at the industry and what they think is coming and it pays to spend a little bit of time keeping up with them. And so that helps you think about how's that going to impact my decision as a designer? Picking the parts, picking the materials.

Zach Peterson:
Sure. You brought up something actually that I've experienced I feel like multiple times in the past 18 months, but in one ongoing endeavor in particular, which is all of a sudden the part has three year lead time and the only place you can get it is from an overseas broker, they have the last 10,000 currently in existence that aren't used in a product or on a Dev Board. And so I'm not suggesting that you go get desperate and start de-soldering breadboards. But when you find yourself in that position, is it common that once a part has a three year lead time according to the major distributors, that it's just going to end up going EOL and you better plan ahead now?

Chris Cain:
I would suggest that. I would have an alternative plan, especially if that three year EOL sticks for more than six or eight months. If you don't see that shifting like in the past year but you see other things getting pulled up, then that's just telling you that what's coming, what's likely coming. And you probably should lay plans to have an alternative somehow. And that may be painful, but a little bit of planning goes a long way because a lot of the work is getting the decision point, hey we've got to make this change. Especially if you're talking about something that has a deep tool change like a microprocessor, that's one of the most difficult things usually changed in the design because it's not just the part that you're putting on the board and selecting for the printed circuit board assembly design, there's a whole toolkit chain involved with that. A whole nother group of firmware and software folks that have got to buy into this change.

And so you want to get those efforts on alignment and realignment started early. In fact I was doing some of that before I recently retired because I saw some of that happening in certain commodity parts, certain FPGAs, certain microprocessors and said we need to be looking at alternatives to make sure that we have some flexibility. Because three years is so far ahead, that's just a sign that they're going to keep their energies making something else, which is fine, that's their business. But that also means you don't want to be exposed and then a year from now with EOL and you're deep in some other project having to get redirected. So a little planning can go a long way so you might be able to work on that on the side and then be ready when the EOL occurs.

Zach Peterson:
I thought I was being crafty when this one part I'm referencing, well I won't say a manufacturer name or anything, but I thought I was being crafty when I bought 200 the last time I was able to get any significant quantity because the of course customers projecting out, hey we're going to need this for the next 24 months. So me saying, "Okay well I can project out that this number of parts is probably appropriate." Sounds like I should probably abandon that and just recommend a design change immediately.

Chris Cain:
Yeah. And I've even done that in cases more recently with just because now you could probably sell those parts and get good money for them.

Zach Peterson:
Oh absolutely. Well you just look at what the overseas brokers are selling them for, they've basically taken the manufacturer price and added zero to it.

Chris Cain:
Correct. And then you also have to be very careful, there's a lot of non-ethical people out there selling what I call is silk screened sand. So there may not even be a part inside, it's just a package. So you have to be super careful, never pay before you verify, that's the rule right now.

Zach Peterson:
Yeah, for something like a surface mount part where you have to design a custom fixture, even just to test it, the hurdle is so great and from what you've just said about silk screen sand, the risk is so great. Why wouldn't you go shopping elsewhere? I think I get what you're saying though about change is difficult because people get locked into these particular parts which then start having stocking issues or extremely long lead times and they become so resistant to change and it seems like the high risk path starts to look attractive even if it is high cost.

Chris Cain:
Yes. And I've also had cases where they maybe weren't a commodity part, rather unique. There are custom things like custom connectors, custom electro mechanical relays, there's different components that you know really need that capability but there's not a lot of sourcing available. And in that case I've gone to extraordinary links not only with the supply chain but tapping back into the R&D community to actually help the vendors resupply their own supply chain.

In fact, there was a case last year where I had a team, we found out that they couldn't source a certain relay, they couldn't get the switching element that was inside of it from their supply chain. We looked at it, we knew somebody else that could supply a similar one. So we actually went in and helped them resupply their own supply chain. So don't be afraid to... Now again, this is not something that a lot of individuals can do, but there's a lot of creativity that can be put to work. We've already talked about design creativity, but there's creativity at multiple levels you can do to find alternative sourcing. And it's amazing when there's a will, there's a way. So a lot of people throw their hands up and there's nothing, the units aren't on paper and no, there may be units around but there may be another way to source it with a little creativity.

So it helps to approach things from different perspectives. That's where I love getting different cross functional teams together because then they can open up some innovative ideas when you do that. And I've gotten out of more really difficult situations that way than I can almost count at this point. But it really does help to have that multiple, functional perspective to be able to look at it and go, "Well maybe there's this way to actually do it." So sometimes you can design your way out, sometimes you can fix the supply chain for the vendor. Sometimes you in-source, you take it on yourself, you go, "This is so critical, it's never going to be that big, maybe we should bring this in house." And then you do a business analysis to see if that makes sense and then if it does you do it. There's also a lot more money that's available with some of the legislation that's being passed, especially in the United States and also coming on in Europe where there's more of this funding available for local sourcing. So that's a resource to take advantage of.

Zach Peterson:
Yeah. The funding for local sourcing though I do understand. And it sounds like you're even suggesting that maybe some companies try to, I guess for lack of a better term, get their hands on a little bit of that to help finance some of those endeavors to bring that sourcing in house or to a partner. But I question the lead time on that, meaning how long does it take that facility to get built, up and running at full capacity, staffed, on and on and on. Sometimes just dealing with municipalities, even that can be an excessive amount of time. And by that time does the problem clear up and you're able to get through your next manufacturing run or get your product even to the next stage where you're going on to the next revision?

Chris Cain:
Zach, excellent points and you're exactly right. So you don't do that for little, short term things. These are bigger strategic things that you are going to endure for a while. So actually one of the things I started years ago with set of teams, we had used a particular vendors operating system, it's a very popular choice 20 some years ago and things changed and we needed to move to a more of an open source and there was a lot of resistance to that. How are we going to take all of our tens or hundreds of resistant designs and shift them? And we actually worked on a plan that said, well we don't necessarily need to do that, we do need to start moving new designs to this, shift a few and then let age take the others. So that... It sounds like we put together this 10 or 15 year plan. It really was more of a 10 or 15 year strategy, but the intent was pretty simple.
One, we got to get started now and stay focused and then you keep measuring where do we need to make more investments or last to stay on course. And along the way we also decided that actually we don't need to be putting our own microprocessors on printed circuit boards anymore, we should probably be buying that as a sub design. While that was upfront more expensive, if you looked at the total business cost, it was a lot less money. So that's the other thing I like to advocate is you have to look at it not only in the cost of the design you're working on, what about the designs you will be doing or all of the designs being done across the business that you're in. And sometimes that leads to a little bit different decision making that actually makes things a little bit easier and you can get things done. But you're exactly right. Those are big scale things that you've got to... You can't do every day.

Zach Peterson:
So you talked about something interesting here and I guess it relates back to some of the most critical components being processors, which is moving more towards an open source model. And there's actually an article that came out just recently, it was in All About Circuits, but they mentioned that more companies are transitioning their chip architectures to RISC-V to help them overcome some of these supply chain issues. And I think the issue being that they want to get away from vendors or first of all from having the license like ARM let's say, and then they can take a little more ownership over that design and get away from a vendor that is already having stocking issues. So another ARM component from them is just another issue to deal with. Maybe they can take that over and contract that out to a foundry. Is that a common approach or is that something that's really just becoming a new thing now that RISC-V has really started to grow in popularity?

Chris Cain:
Yeah, I think it's been around for a while in previous generations of processors, but it's more popular now because people, as the ecosystem has become very complex, microprocessors is probably one of the most complex ecosystems in electronics, that gives you the opportunity to really, you have to ask yourself the question, is that choice of microprocessor and its development toolkit, is that really core to me delivering value in my design? I need it but it is how I'm delivering my core value differentiation or is it a capability I can make a lot of choices on? And if it's then it's a context and if it's a context then you might see, gee, can I outsource that less expensively than having all that expertise in house? So can I use an existing design and buy the module? Can I actually pay somebody who does this day and night as a service provider and subcontract it out to them?

Those are all valid strategies, they all have trade offs. But you first have to ask the question, is that choice of component, is that actually crucial for me to deliver the value I'm trying to create with the end product that I'm doing? And then that should focus you on how much you invest in that decision and whether you should outsource it or how much. But I think in terms of things like that, memory's been another thing in FPGAs. Having that flexibility, especially as we get reminded now with supply chain challenges becomes invaluable. We saw instances of that with the tsunami in Japan in 2011. The flooding less so in Thailand, that impacted mostly the hard drive industry because those were being assembled in Thailand. But when you have a regional impact you lose some part of the supply chain and everybody grimaces.

This one's big because the whole supply chain flexed and it's still working to respond and it's taking years to get into it and to get out of it. But it's also reminded us that there's a cost of this and how much do we want to invest to deal with that additional cost, that opportunity. So you have to step back and make those choices both as a designer but at a bigger level too and how much do you want to invest in those tool change. And so I think those are great discussions and thoughts to have. And then whichever choice you make, great, go with it and then revisit it once in a while as things change.

Zach Peterson: 
I like what you said about is the portion of the design, let's say that is having the supply chain issue actually the core value creator in your product.

Chris Cain:
Right.

Zach Peterson:
And I think this goes back to the issue with people getting stuck on a particular design and there's a perception there that it's just going to be too costly, it's going to take too long, reason that A, B and C, that we don't make a change or there's a perceived capability there that this is the only way to create the experience, let's say, that my user cares about. And so in order to get away with or get away from that, it sounds to me like companies just need to explore other options early.

Chris Cain:
Yeah.

Zach Peterson:
And just expect that the thing that you're locked into, number one probably isn't the core value creator, so you need to assess that first of all. And second, if it isn't the core value creation mechanism, there are other things that you can do that can replace that capability and you still get the same product.

Chris Cain:
Exactly. Or actually you might get a better product because your designers have focused more of their talent and attention on creating that more that core value. So that's what I love about thinking about supply chain, I view it as a way to maximize the return on my investments. And some of the biggest investments any business will have is that it's in its designers and it's software developers. You want to make sure that they're maximized. Do they really need to be spending time on an AC power supply section? Maybe they should go with an outside, I call them a wall wart, but an AC to DC brick that simplifies a lot of designs and a lot of testing requirements because you're not bringing AC into the product anymore.

Now there's trade offs with that as well. Well understood. But I found sometimes if you break that mold in it's like, well that's just less work we have to spend in that area, then we can spend the work in some other area and create more value. So I love the thought of using supply chain or tools or anything, processes to create more value. That's what I always love about engineering in the 37 years I've had so far, I love creating things.

Zach Peterson:
Well you brought up 37 years, I'll be 37 in seven months. So you have definitely significantly more experienced than I do, so I respect the experience. And given your experience, I think it's always interesting to compare what's going on today with some of those challenges in the past because anyone who has worked in this industry long enough I'm sure has experienced multiple disruptions of some form or another and possibly multiple geographically isolated disruptions, like the Japanese tsunami at one time or another. I'm wondering if you have that perspective on the history of the industry and the supply chain as a whole. What's the mindset for navigating these types of disruptions when you have a COVID or when you have a China zero COVID policy and you never know when some big group of factories in China is going to get shut down in quarantine for a month.

Chris Cain:
Yeah. And so you have to take that. And to be honest, a lot of people talk about supply chain resiliency at this point. And resiliency actually, if you look two years ago, resiliency was about making sure your workforce stayed healthy, could actually work together in a COVID spread environment. There's a lot of talk about that. That that's passed a little bit except in places as you said in China. And so now you're seeing a much a wave of electronics manufacturing both at the IC level and the assembly level shifting to places like Vietnam, Thailand, Malaysia, the Philippines, A lot of that existed before but now it's just been bumped up a couple of notches because people, they need to lower their risk. And it pays even as a small scale designer to pay attention to that because those could present an opportunity for you to take advantage of that new lower cost, more resilient, more flexible supply chain.

Like the legislation that just came out in the US, that's going to change investments. Right now 4% of the printed circuit boards are built in the US the rest are built elsewhere, mostly of course in Asia and in China. But I think that's going to start shifting mainly not because of the legislation but the cost of logistics, the cost of oil. Moving stuff across the ocean both time and the amount of fuel required to move it, that's expensive, that's going to really drive I think more of the localization. We've been seeing that for years, there's a lot of electronics manufactured in Mexico now. So again, it pays to look at these big mega forces and then just be ready to take advantage of them when they start to play out. And as you said, the ones we can't predict are the pandemics, the tsunamis, those happened, we couldn't predict them but you can predict what will happen from them.

And from the tsunami there were a lot of very unique supply chains in Japan that were disrupted and a lot of people said we need to set up at least a backup somewhere. Still love the Japanese supply chain, that came back relatively quickly, but it pays to have a backup supply chain somewhere. That requires some investment. And so I think we're starting to see that with COCID. And we just talked about some instances where some parts have three year lead times probably ought to be starting to think about maybe I'll never see that part again and I need to think about what my alternatives are. And so I think that's a good thing to do at this point.

This latest impact in supply chain is about is as... I've never seen it as widespread. It was global in nature, it impacted every place and not just a one time event, just a rolling wave. And now what I'm seeing is that the bigger impacts are less about just getting the next set of parts. Some of the things are freeing up but as I said now choices are being made, maybe we won't make that line of microprocessors. We were going to consider an end of life on that memory in five years anyway, let's just do it now. And so those decisions are being made, you want to be careful and try to get in tune with those as quickly as you can because that has a big impact on the design you're working on now or probably a big impact on the design you've already released you may have to go redo.
 

Zach Peterson:
Well in terms of what maybe companies need to do going forward in the current environment, you brought up some good points about what's going on with logistics and fuel costs and all this. And I know fuel costs push up the cost of everything else it's related to and it's essentially an inflation driver. And so if you look at the cost of labor overseas and you look at the fuel costs and the time involved, of course time to market always being critical. Yes, I agree with you, geographic diversification makes sense and it makes sense to spread some of that new capacity back home so that you can access it easily and you're not subject to global level disruptions to the same extent that we were in 2019, 2020.

Now cost is an important part here, but there was just a report released from the ECIA, so the Electronic Components Industry Association, and they pointed out that their sales index has started to go over a cliff so to speak. That terminology wasn't used, but when you look at their index and the decrease over a one month period, it looks like that. And then the EDDI report from Spectra, which is one of the divisions of Altium, shows pretty much the same thing in terms of sourcing activity and inventories. So given that that is coming up in the short term and then demand still being high because we still have stuff that is impossible to procure or you still have to go overseas for it. And then given the fact that new capacity doesn't come online in a matter of months, it is typically a matter of at least, bare minimum, a year, what do people do between now and then?

Because I think people are rightfully maybe hesitant to go overseas as their first choice. There are brokers I've worked with overseas and I've never gotten anything bad from them, so my wooden desk, I'm knocking on it right now, just hoping that that never happens. But what else can we do outside of some of the strategies that you've mentioned which appear to be more like, at the design level, working with variants and considering having multiple variants of a design on the front end.

Should design firms and design teams at large companies maybe consider just building that into their budgets immediately. And if you're like at a small design firm, you quote that for a client and you just say, "Hey listen, we've got these five at risk parts, I'm going to give you a variant that has the alternative package on it." And maybe it costs an extra five hours or something. But they're going to be really glad that they spent that extra five hours of design time up front and got that risk taken care of versus when they try and go to produce something at 500, a thousand units and all of a sudden they can't procure those parts.

Chris Cain:
Yep. Or be ready to do a quick design spin, which fortunately were enabled by some of the great tools and methodology and everything that's available. So I've learned to count, this has changed over the past 5, 10, 20 years of course, but I've found it's much easier to spin than we tend to give ourselves credit for. And PC boards actually I'm amazed at how quick you can get a turn. There are some vendors I've seen they'll quote less than 24 hours. Depending of course on the complexity, but that's not unusual. I've had a number of teams do that for NPI designs, that's very helpful in that case. So bank on that spin flexibility to deal with what is now the unknown. Because...

So scope, schedule, resources, I was a project manager for a lot of my career and I still think in that trinity all the time. And so if you can be flexible on scope then you can adjust a little bit on some of the other things. So I give people, build that into your plans a little bit. And then also I go after what I call maximum usage. Look for things that have the biggest flow because those are the things that are probably keep flowing. So the more you can attach to that flow, the more chances you'll have of continuing to be able to procure a few more parts out of that flow. So if you have some way of finding out what's the biggest flow for that set of components or other alternatives without having to do a huge amount of work, that pays off. And we talked about that a little bit earlier with design variances like temperature coefficients, memory sizes you want whatever, build yourself a little flexibility and if you could do that architecturally as well, then that's another form, although that tends to be more expensive.

But I think we're going to continue to see things change. But as you said, I think I'm starting to see the same thing. The demand side's starting to flex up a little bit. Well people have had to spend more of their dollars to put fuel in their cars and more food on the table and there's a fixed amount of dollars so they maybe put off the next electronic spend. This is at the consumer level, but it tends to float up. So we're starting to see the demand side let go. That will help, again, the parts that have the most usage. Those are the ones that that'll become the most available and their price will drop the most quickly.

The other thing is, and is I'd coach people to be a little bit careful about buying the future. I've seen some decisions in the past year where people were buying three years worth of parts at 10x, 20x levels and it's like whoa, I don't think it's going to last that long. And plus if I'm faced with spending $5 million, let's say buying some three year supply parts as opposed to reinvesting in a turn a year from now to get a variant, maybe I'll pick that path. I'll buy a year's worth, not three, I'll buy some future, but I think I'd rather depend on my other flexibility, my design flexibility, the overall sourcing flexibility.

Like you said, a lot of these brokers are working over time, there's a lot of people putting a lot of effort and money. I'm always amazed at how many parts get squirreled away around the planet. Just amazed. So they're still prying loose a little bit, but more of that'll happen not because they're at brokers but because somebody bought way more than they needed. So that three year supply turned into a six month, I didn't need anything, I need a 10th of it let's say. And then they put them back on the market. That should start to free up... Now will it free up your part? That's always hard to say. But at a macro level I think we'll start to see some of that and we'll suddenly see, I think by the end of this year, not for everything, but a lot of things will start to ease up, especially for the common parts.

Zach Peterson:
I'm starting to wonder also if we'll see a state of revolving surplus instead of revolving shortages. Because right now there's a passive surplus. You go look up most passives on Digi-Key Mouser and yeah they've got 10 million in stock, no problem.

Chris Cain:
Yeah. So yes, if history is any indication, that's always happened before and it'll happen again. Memory's gone through that forever, especially member dynamic memory, those waves. They've dampened a little bit only because instead of having six or eight suppliers, there's like three. But still for a lot of other commodities in terms of parts, that'll happen. Yeah.

Zach Peterson:
So what does that do to the business cycle for different companies or different areas of the industry? How does it affect a parts producer both in terms of the investments they make, their profitability, how they operate, versus the parts consumer, even a high volume consumer like, for example, Keysight who has to buy a lot of components and put those into an assembly. Seems like it's going to benefit the consumer because obviously surplus supply, you would expect naturally prices to drop a bit. They're able to increase their margin for the producer, maybe they have to scale back and they run their fab at much less than full capacity.

Chris Cain:
Yes. Or maybe that part that they suddenly EOLed, they'll bring it back. Because there's demand still there for it. The one we EOLed three months ago, "Oh well we'll make another short run of that and make that available." So I think some of that will start happening as well. That's happen before it'll happen again. Now will it hit your part? We'll have to wait and see. But yes, they'll spring back. And what that is right now the powers with the suppliers because they're short on the supplies, so the prices rise, they have all the negotiation position and then it'll shift back to the buyers, probably be a little overweight on the buyers and we'll see a collapse in some areas or an oversupply of parts and then it'll shift back again, it'll dampen out. It's always a classic dampening economic wave form so to speak.

Zach Peterson:
Yeah. One other thing I was wondering, and this has come to mind recently after speaking with Travis Kelly, I'm not sure if you know who he is, but he's a CEO of Isola Group and he had mentioned that the supply chain for materials, just the raw materials that go into printed circuit assemblies, and I'm sure plenty of other materials we could point out, is probably even more fragile than the semiconductor supply chain.

Chris Cain:
Yeah.

Zach Peterson:
So all of the stuff that we've been talking about in terms of components, does it apply equally to raw materials used in assemblies?

Chris Cain:
It does not. In fact, it actually gets scary. If you look at ICs like the raw silicon ingots that go into, they dice them into the wafers and they build an IC wafer out of that. Those raw ingots are made by just a couple of companies. We're talking about very mature businesses that over time have gone down to a few players. They make fairly good money, but there's not a lot of players left anymore. And then there are geopolitical challenges. We all know that a lot of the rare earths are still mined out of areas in China. And there were actually, there were some rare earths that came out of the Ukraine and the war in Ukraine put a shortage on those. We all know that lithium is, although it's one of the most common elements in the planet, it's not equally distributed, so it's hard to mine out. And so right now there's a massive scramble for lithium, for lithium ion batteries.

And so yeah, the materials has its own unique flare. And I'm not suggesting a lot of electronic designers getting to that too much, but it's probably good at least at some level to be aware of that and know where there may be some sensitivity and just be ready to go with the larger flow, again, maximum usage. Although I'll tell you where there's the biggest demand, they'll also be the biggest investment. So it'll recover probably more quickly than they think. They like to do a lot of doom saying and say, "Oh we won't be able to see this for three years." No, we'll probably see it in about three to six months. It may not recover for a year, a year and a half. But when there's money pushing behind it, that generates the supply pretty quickly actually. But again there it's maximum usage. You want to depend on that.

Now where you've got a very limited, like I remember product that my teams worked on was actually was an x-ray inspection system for printed circuit ports. And we designed and built our own x-ray tube, high powered x-ray tube. And in that tube it actually had a grid at one element it was made of hafnium.

Zach Peterson:
Okay.

Chris Cain:
Hafnium.

Zach Peterson:
Yes.

Chris Cain:
Look up hafnium.

Zach Peterson:
Heavy metal.

Chris Cain:
There weren't many people on the planet that would mill hafnium into a grid for an x-ray tube. Very limited supply. In fact, at the time we had one guy in the LA area. There's an amazing number of little shops in the aerospace defense industry in different areas like LA and whatnot. And one of the things that I did is I said, we need to have an alternative. And we found some guy in Eastern Europe and set up a different supply chain. And we actually would give them, we'd alternate the contract, so they both stayed in business.

And so you have to... That's an incredibly unique and very precise situation. But take a look at how you're adding value for your customer. If you have anything like that, give that a fair amount of attention. Don't presume it'll last forever. And so it pays to have an alternative, which comes back to, so finding that maximum usage stream and having alternatives is pretty key. And then being able to quickly shift to it. That's the resiliency. So if you can build that into your process as both supply chain and design, you're probably going to be okay.
 

Zach Peterson:
I have never heard of a buyer splitting contracts between two vendors to keep them both in business because they're that critical.

Chris Cain:
Oh yeah.

Zach Peterson:
First of all, kudos because they're probably both individuals and I'm sure they need it being that what they do is very unique. But that's actually a really novel approach to ensuring that you have a resilient supply chain that is also geographically distributed. So I guess great job on that.

Chris Cain:
Yeah. But you don't get a lot of credit for that until all hell breaks loose. Up to that point, people are going, "Why are you wasting time and money doing this?"

Zach Peterson:
I was just thinking that. I was just thinking that.

Chris Cain:
Yes. So it's actually not unlike design decisions that you make. How do you know you're going to need that capability, that much of it? It's a judgment call. You can do some scenarios and actually did that in supply chain and it's easy to do the dark... I call them the dark scenarios, the dark side, the disaster scenarios. But with the single source, if they up and quit, stop, whatever, then you're done. What's that going to cost you? And you can map that out and there's a recovery and you go, "Well that's not acceptable." Then you should have an alternative.

And compare the cost and ongoing investment to support that alternative as compared to the disaster scenario. Although I would rather say on the more positive side, like what I did, I did a scenario that said, "Well what if our business doubled and I needed to be able to respond." Now I have the ability I can pass off and increase the contracts to these two different companies or individuals to make this particular component and boom, I could double production capacity and get an upside. And a lot of times being able to react in a quick time and take advantage of the upside that's being ready for that, that kind of business or resiliency, either in supply chain or by your design teams, that can be worth a lot.

Zach Peterson:
Well these are all great things to think about and I definitely appreciate you coming on here and discussing all of this with us because this is the type of stuff that I've mentioned before. I've made it my resolution for 2022 to get deeper into this. And so this has been very helpful for me personally and of course I hope the rest of the audience. We're getting up there on time, but I definitely want to say, Chris, thank you so much for joining us. This has been extremely insightful and hope to have you back in the future, hopefully when supply chains get a little better than their current state.

Chris Cain:
A little less exciting. Yes.

Zach Peterson:
Sure. Yeah. Maybe that one won't have as many views.

Chris Cain:
There we go. Well, thanks Zach. I really appreciate it and I hope the audience had some good insights and always love to hear back from people and learn. That's the main thing. I'll leave you with one last little bit, always pay to learn, there's always a payback learning no matter what job you're doing.

Zach Peterson:
Absolutely. Learning always has positive ROI.

Chris Cain:
Exactly.

Zach Peterson:
Thank you very much again. And to everyone that's out there listening, we're going to have some great resources in the show notes, make sure to check that out. Also, make sure if you are watching on YouTube to hit that subscribe button, you'll be informed of all the new updates as they come out. And last but not least, don't stop learning, stay on track and we'll see you all next time. Thanks everybody.

About Author

About Author

Zachariah Peterson has an extensive technical background in academia and industry. He currently provides research, design, and marketing services to companies in the electronics industry. Prior to working in the PCB industry, he taught at Portland State University and conducted research on random laser theory, materials, and stability. His background in scientific research spans topics in nanoparticle lasers, electronic and optoelectronic semiconductor devices, environmental sensors, and stochastics. His work has been published in over a dozen peer-reviewed journals and conference proceedings, and he has written 2000+ technical articles on PCB design for a number of companies. He is a member of IEEE Photonics Society, IEEE Electronics Packaging Society, American Physical Society, and the Printed Circuit Engineering Association (PCEA). He previously served as a voting member on the INCITS Quantum Computing Technical Advisory Committee working on technical standards for quantum electronics, and he currently serves on the IEEE P3186 Working Group focused on Port Interface Representing Photonic Signals Using SPICE-class Circuit Simulators.

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