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The Semiconductor Shortage Hit the Fan! Now What?

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When things get weird, we often look to experts for solutions.  The COVID-19 induced semiconductor shortage is no exception.  In this week’s Fireside Chat with the Xperts, Creative Electron’s David Kruidhof and Dr. Bill Cardoso are joined by Techlity’s Andre Oliveira. Mr. Oliveira, it turns out, is one of those experts we just didn’t know we needed, until, in fact, we did.

The semiconductor and electronic components shortage is in full swing, and not going away anytime soon. André and the team at Techlity support manufacturers with proper component management and component design, along with an array of other specialized service.  For those who are really proactive, Mr. Oliveira emphasizes the importance of approaching the design stage with a focus on mitigating the impacts of component obsolescence, shortages, and other potential supply chain disruptions.  Like Creative Electron, they are highly focused on the issue of keeping counterfeit components from corrupting the supply chain.

Enjoy this episode to learn a bit about the known unknowns, the unknown unknowns, and the Xperts like André Oliveira, who stand ready to help.  Learn more about Techlity  and their services at https://techlitycompany.com . If you’d like to learn more about how Creative Electron’s X-ray inspection systems support counterfeit avoidance, please reach out.  Register for upcoming Fireside Chats with the Xperts and view our archives here.

 

Transcript:

David Kruidhof:
All right, time for another Fireside Chat with the Xperts. This week, we have a special guest here, Andre Oliveira with Techlity. Techlity provides a very unique service on a topic we’ve been talking about a lot over the last few months. It was the hot topic, obsolescence, component shortages, supply chain, those kinds of things. Techlity has a very unique offering, I believe. So, we’re really excited to have you on here. Welcome, Andre.

Andre Oliveira:
Thank you, it’s a pleasure to be here.

David Kruidhof:
Andre, why don’t you introduce the company? Give us just a brief intro of what you’ve been doing, your background and I’m sure we’ll have a lot of questions for you.

Andre Oliveira:
Mm-hmm (affirmative), sounds good, yeah. So in Techlity, what we do, we have two main areas that we work on, which is the first one is component engineering, where we deal with everything surrounding component management, right. Maintenance of parts database, obsolescence management, counterfeit avoidance, we select alternate parts. Sorry. We do everything surrounding component engineering really. In the other, our other arm is the manufacturing engineering, which we help companies to connect between design and manufacturing engineering’s. Because especially if the company, if they don’t have, they don’t manufacture the parts themselves, they hire someone in a contract manufacturer to do that. So, it’s really important to have a proper connection between design and manufacturing. And that’s what we help them also to do.

Andre Oliveira:
My background, I’ve been working with component engineering for a long time now. I worked for Embraer, which is the aircraft manufacturer for several years. And my main task there was to be sure that the avionics suppliers were doing everything right regarding component management. So that gave me a lot of good experience because I was in contact with all of these OEMs that deal with the avionics, that view the avionics. And I was reviewing their procedures, their obsolescence management procedures, counterfeit avoidance procedures, everything again surrounding their component management, just to be sure that what they were doing was good for the company. And then I had, some experience with some OEMs. So, I have both experience in the system integrator, which is the one receiving the avionics and also in companies that develop the avionics, so I have experience developing the plans and also helping companies, other companies to develop their plans.

Dr. Bill Cardoso:
And in case you guys haven’t figured out, Andre’s a good friend of mine from Brazil, so you might have recognized the accent.

Andre Oliveira:
Right.

Dr. Bill Cardoso:
And for those who don’t know, Embraer is actually the third largest aerospace company in the world. It’s a Brazilian company. And if you’ve ever flown a small jet at United, Delta, or American Airlines, JetBlue, you flew one of the airplanes that Andre helped to build.

Andre Oliveira:
That’s right.

Dr. Bill Cardoso:
Now, so we talk about obsolescence a lot, how does that connect with the component shortage that everyone is talking about, right. So, let me change the question. Why don’t you walk us through what’s happening right now in the market, right? Why do we have this component shortage and how you guys have been helping companies, right. Given your experience with obsolescent components, how does that, is applying now to this component shortage?

Andre Oliveira:
Okay. Yeah, so as everybody knows, the electronic consumption has increased a lot in the last year, especially because of the pandemic and that led companies to building more and more electronics and buying more and more and more components. And the compartment manufacturers, they were just not prepared for that. And then companies in all different industries, they kind of start having issues, buying the components should manufacture their equipment. So, that’s a big, huge issue. And it’s affecting all industries all over the place. Some companies, they had a specific warning that this was happening, the consumer products manufacturing companies, they knew that they were giving out much more products than before. So they kind of knew that something was different. So they could be a little more prepared for that. But other, like the automotive or aerospace industry, they didn’t see that coming at all. So they had more issues of trying to deal with that.

Dr. Bill Cardoso:
A lot of these companies, they decrease their buy of components at the beginning of the pandemic, right? Because they were forecasting a massive drop in consumption, what they did not realize that demand we’re going to step function on them. And when that happened like, “Oh, wait a minute, just joking. All this stuff I didn’t buy, I need it tomorrow,” right?

Andre Oliveira:
That’s right. So that became a huge issue for sure. And most companies or a lot of companies, they were not prepared to deal with the situation. And what we see today is that a lot of companies that we’re dealing with right now is that their planning was not good enough to deal with situation like that.

Dr. Bill Cardoso:
Yeah.

Andre Oliveira:
So, now they are struggling.

Dr. Bill Cardoso:
So, tell me how you were helping these companies because of what I really like about your business model is that it, which is, I think is perfect timing for you guys is the fact that you have, years and years and years of experience dealing with component shortages, obsolescence, right? Because when you have an aircraft that has to last for 30, 40, 50 years, you have to deal with those problems, right? So, you already have all the background and now you can help companies out there who never had to deal with it before, right? Now, the consumer electronics guys, automotive for the large part, never had you deal with this. So, now you can help them and bring all that expertise and bridge this gap, right? Between a set of companies like the aerospace and military who’ve been doing this for a long time to a whole new set of companies, that are desperate for your expertise, right? So, how are you doing that? How are you helping these companies about this?

Andre Oliveira:
Yeah, no, what we are doing is we are bringing them the expertise, right? Because as you said, defense companies, aerospace companies, usually they are more used to deal with obsolescence and even avoiding counterfeit because that’s something they build every day. They build equipment that will last 20, 30 years. So, of course the electronic components are going to become obsolete on that time. So when they are developing electronics, they know that they will have obsolescent issues. So, they are ready to deal with that. But there’s a lot of other companies, even some in aviation industry or smaller companies or medium to small companies, they don’t understand quite well how to manage obsolescence and how to deal with the shortages of any kind. And this is, this is how we are trying to help them. We’re trying to bring them the expertise, showing them how to, to work on that.

Andre Oliveira:
The different types of standards that are out there in how to understand the intent of each one of the requirements of these standards. Because one thing that I realized is that there are big companies like Boeing, Honeywell, Raytheon, Waco Callings, big companies, that they were the ones who develop these, the main strategies to manage obsolescence and avoid counterfeits and many other things surrounding the component management. So, they know how to do this stuff. Well, there are a lot more companies that are medium sized, small sizes that they didn’t participate in the development of these standards. We don’t really understand the intent behind the requirements of these standards, how to really use these standards in their favor.

Andre Oliveira:
So, most of the time, they will have a document, which they call a plan because their customers require that. So the Embraers, the Boeing’s, the Bombardiers, the Airbus, they’re going to request the equipment manufacturers or the equipment suppliers to have those processes in place. So, they will get to these companies, they will get standards, they will write something, but they don’t really understand what they’re supposed to be doing. What’s the intent of each one of the requirements. So, that’s where I’m trying to bring them this knowledge is expertise to help them understand and that, and do more than just check the point of the life cycle and check stock. There’s much more that you can do to manage exhaustive. And that’s what we’re trying to bring them.

Dr. Bill Cardoso:
So, in that sense even distributors can use your help. Then if now all of a sudden they have aerospace companies or military companies calling them to follow specific standards, you can help them navigate through, what’s out there and how to follow it.

Andre Oliveira:
Oh yeah, for sure. Because I mean, the company is right now to the big companies, they are kind of uniting themselves in creating these standards. So, they are kind of creating a way they want stuff done. Right. So, we can help flow down those requirements to other companies, not just as you said, not just the manufacturers themselves, but even component distributors. How can we have internal processes that we will allow other companies to buy from us, understanding that we have the proper bid process and appropriate guidance in-house right. To manage the components and everything. So, yeah, for sure that’s a possibility also.

Dr. Bill Cardoso:
Now, this is the end of just-in- time the method that many have praised as the best thing since sliced bread. And it was the most intelligent managed supply and inventory management technique in how the sudden people got screwed with just-in-time. Is that, is this the end of just-in-time Andre, are they finally going to learn?

Andre Oliveira:
I’m not sure. I don’t believe so right now, because I think the strategy would have different strategy can use. Right. And just in time is something that a lot of companies are implementing and everything for so long right now. Right. For many, many years. And I don’t think that’s the problem per se. I think the main problem is it’s maybe before, before that, when they are designed what they are doing and how can, what can they do in designing to make sure in planning to make sure that issues like that can be solved more easily? So I wouldn’t say that it’s the end I guess it may change a little bit, but what really needs to change is the way that companies are managing their parts nowadays.

Dr. Bill Cardoso:
So, you mentioned things you can do ahead of time to improve your ability to manage obsolescence and component shortages. So talk to us a little bit more, what are those things? I mean, what can a company, do with the design level to make that impact less painful.

Andre Oliveira:
Okay. Yeah. So, there are a couple of things you can do, right? One thing that’s very important to do when you are in the early stages of design is to develop a risk assessment. And I presented an article the Counterfeit Symposium from CALCE a couple of years ago. I think it was 2016. When I was talking about how to do a good risk assessment. I presented something which I called obsolescence modes and effects analysis. So, it’s basically FMEA, but in light of obsolescence and what you do there is you try to understand what’s the probability that you’re going to be. You’re going to have an obsolescence problem. What will be the severity of the problem, right. And how would you be able to detect that beforehand? So, you have to do this kind of analysis beforehand when you’re selecting components, especially the components that you see.

Andre Oliveira:
There are no alternatives for them. So, or at least you can find documents for them. At that point, you have to be sure that you understand the risks in your accept risks to move forward. And as you move into the phases, you have there’s design considerations that you also have to take into account. So, I’ve seen problems in companies that they have, for instance, they selected the part, but they didn’t realize that the specific part they request it was from a manufacturer that was the only one who’s using a specific package. So, all the other manufacturers were all using different. It was very similar components, but at different package, they were all using a different package. If you understand the stuff before you select a part, you might have different options when a becomes obsolete.

Dr. Bill Cardoso:
Because now you have seen a different package. You don’t have any ability to maybe find a equivalent to one to use in its place. Is that what it is?

Andre Oliveira:
Exactly. So, you have that part which became obsolete and you don’t have an alternate for that, product dropping, you have to do a redesign, even if it’s a small redesign, you have to do that in order to accommodate another part. So, there are a lot of things you can do while you are designing to make sure that you’re not stuck with a specific part and you can’t accommodate the risk of having just that specific package. Right?

Dr. Bill Cardoso:
So it’s interesting because you know, this company should be, they should call you at the design level, right? It’s one piece of the design team that a lot of companies neglect, right? They have the design itself, right. Electrical diagram and all the stuff that has to happen. You have the PCB layout, right? The guys are going to go on a CAD design and route traces and layers. But the component engineer, especially in smaller companies, that’s neglected right at that expertise can save a lot of time and money, a lot of headaches in the future, right? Because like you said, by just using the right package that allows you to, you know, a couple of years later, she droppings instead of having to redesign the board, which is incredibly costly and in some applications, military, and avionics is one example where you have to go through qualification processes, right. A redesign might require whole qualification, right?

Andre Oliveira:
Yeah. For sure. And I can’t stress this enough, hardware designers are not component engineers. They are different. So, component engineers, they know a lot of stuff that the hardware designer really doesn’t understand. So, I worked with companies that at the end of, of doing some work with them, they just came to me and said, I never knew how it was like to work with the component engineer. I didn’t know how, how important that was. Because as you said, sometimes more smaller companies, they don’t have component engineers. They think the hardware designers can do the work, but they can’t. They are focusing on other stuff in the component of engineering is very important and companies don’t understand how much they are missing. If they don’t didn’t have something like that in their companies.

Dr. Bill Cardoso:
That’s a very good point because you end up focusing so much on the hardware and in the firm and the software, right. That the actual components that go on the board end up neglected and companies pay later. Right. And that’s a problem. And other than drop ins. And is there anything else that companies can do to, I mean, mitigate or help with component shortages from, you know, that you guys can help in the procurement process or anything else? Of course, counterfeits and everything else that’s in the market all days.

Andre Oliveira:
Yeah. So we act usually in two different situations, the first one is the best case scenario, where we are involved in early stages of development, and we can help them plan. We can help them review their designs, review their bombs and everything. We can really support the whole development of the product. And that’s really the best case scenario, where they get the most benefits for more work. But there’s situations like, like right now where the components started out, their companies did not plan for that. They don’t know how to act in this situation. They don’t can find a lot of parts, so they don’t know how to, what to do. Right? So for those companies that need help right now, what we can do is we can help them to mitigate the risks of buying parts from other than the authorized distributors. Because right now, a lot of parts, it’s really impossible to find that Digi-Key, Mouser, Avnet, Arrow, or whoever is the authorized distributor that you use, you can’t find them. You try to go into the OCM, did the component manufacturer but, they just can’t buy the part.

Andre Oliveira:
So, what we can help them is to lower the risks of getting parts from other than the authorized distributors, going to independent distributors in making sure that the independent distributors have the right processes. And when you buy the parts that you have the right process on buying the parts and testing the parts, doing the right stuff, to make sure that you’re not just getting a counterfeit that’s going to fail on the field. Like before or after you installed that on your equipment. So, we really can help companies to lower their risks when buying parts from other than of the authorized distributors.

Dr. Bill Cardoso:
Yeah. A couple weeks ago we had Richard Smith here from ERAI and I was baffled, he was telling us that a big complaint from a companies right now is wire fraud. So, basically companies who need components going to a completely unknown website, finding the component, you’re looking for guess what? They always have, what you’re looking for, sending the money and all of a sudden the website is gone, phone numbers are gone and they baffled like what happened, right? So, we’ve been working in this ecosystem of component counterfeit component avoidance, right? So, a lot of the things are second nature, right? You use escrow, you a lot of the things that you, you know, what you do, that’s how you do it. When you, when you’re dealing with someone outside your approved vendor list, outside the AVL. And now with, with this component shortage, you have all of these companies, right.

Dr. Bill Cardoso:
New to this market of, not being able to find things and counterfeiters, right. Filling the gap, giving, having everything you need. So, I really like how you can bring decades of experience from the hardest hit industries out there to a whole new set of companies that never had this before. Right? I mean, the companies you’re talking about, Boeing, Honeywell, Rockwell, Raytheon, they all have staff. They have people who do this for a living, right. They do counterfeit avoidance for living inside companies, a bunch of people out there smaller, even big companies that have been dealing in the consumer electronics. You don’t have that. They never have to deal with it before. So, that’s where you guys come in. Right? You just can come in and say, ‘Hey, this is how you buy components. Right? These are the process procurement process. This is the kind of flood mitigation process you have to have. You can’t just get stuff from the box and putting your boards. You’ve got to check first, right?

Andre Oliveira:
Exactly. Yeah, no, that’s right. I mean, one thing that components shortage is really showing is how the, the company’s processes are not well established. A lot of people, they don’t know how, what you do. They have processed that they can’t really, or they are not really following. And they don’t know how to do things. Well, I know I am remembering right now, one example that I, one company that was helping that they really had an issue. We ended up obsolescence management, connecting different areas of the company like engineering. They had like, they had the autonomy to make some decisions by themselves without contacting the higher management and to solve an issue with the components shortages.

Andre Oliveira:
They decided that they were going to buy like a hundred. I think it was more than that was like maybe 200 parts to fill that gap that they couldn’t fill with the component shortage. Right. And they just spent like $20,000 buying parts. And two weeks later, the higher management decided that were there, they were canceling the program. So they just flushed $20,000 down the toilet. So that’s the kind of thing I’m talking about. If you, if you go to the company that you see, do they have a process, they have a plan, but they don’t really know how to act on the plan. They don’t know how to connect the dots and, and create a whole process where your management’s actually effective, you know?

Dr. Bill Cardoso:
Yeah. And you mentioned SMTA CALCE workshops. So, Andre is presenting a paper at this year’s event, which is going to be, I was just checking here is August 3 through the 5th. It’s going to be an online event. So, you guys can attend from anywhere in the world you’re in. And we’re going to put a link with this video and how to register and how to participate. What’s going to be your talk about Andre.

Andre Oliveira:
So, the idea is to talk a little more about, about that, how companies need understand better, how to act on the obsolescence management and counterfeit management. And their parts management and how the lack of knowledge is impacting them on that. So, it’s going to be like a bigger presentation of what I just talked about today.

Dr. Bill Cardoso:
And do you see this component shortage problem going away anytime soon?

Andre Oliveira:
I really don’t think so. People are working from home and they are liking, working from home. So, they are going to keep buying more stuff and more stuff. And the component manufacturers, they really don’t want to scale up their production because that’s very, very costly and they don’t know what’s going to happen tomorrow. Right? I mean, they spent millions and millions of dollars expanding their ability to manufacture components. And then next year they have to scrap that because there’s no need for that much, that many components anymore. So, I really think they are not going to scale up their production. So, I think the problem is going to still be there for a while.

David Kruidhof:
Great

Dr. Bill Cardoso:
Good news. Great news. It’s a tough one. I mean, it’s, it’s great economy’s recovering, right. It’s great that people are productive at home. Right. And can, and economies are opening just yesterday, California, officially open the state and is allowing people to go outside without a mask. And restaurants are full capacity. So, you see the economy is coming back and, and, and the thing to challenge of this disruption we had is the fact that it wasn’t an economic disruption, right? Was that a natural global natural disaster? So, the economic engine was functioning pretty well.

Dr. Bill Cardoso:
And then you have this, function, step function coming in is disrupting the economy, setting everything to zero. And then the recovery people thought oh, it’s going to be, a ‘w’ shape. It’s going to be a long ‘L’. No this thing is up coming back up quick and caught quite a few people by surprise. So, as you said, capacity is very expensive to grow and it doesn’t happen overnight. I know the U.S. government is trying to set up initiatives to bring some of this capacity state side, but you know, that’s a topic for our next conversation, right? David?

David Kruidhof:
We are running out of time. We’ve got two minutes, but Andre did want to give you a chance to give a little plug more directly for Techlity. How do people reach you? Is your reach global? Are you doing things, focusing locally?

Andre Oliveira:
So, we can reach any companies globally. The good thing about component engineering is that we can do a lot of work, not necessarily being in there locally. So, we are located in Ottawa, Ontario in Canada, but we, we are, we have customers in Canada in, in United States and we’re in talks. We also other companies in Europe. So, there’s really no limits wherever you are to feature contact us. I’m not sure if you can see the phone numbers and the websites in there, but you can contact us a mutual website, Techlitycompany.com. And you will find more information there. You can email us. We’ll be happy to assist in any way we can.

David Kruidhof:
Awesome. So you can help pretty much anybody.

Dr. Bill Cardoso:
Yeah. The bottom line is if you were designing a board or if you are not finding components, call Andre and right. If you can’t help them, you know who can help them. Right, Andre?

Dr. Bill Cardoso:
That’s the bottom line.

David Kruidhof:
All right. Well, thank you very much for your time. Andre is great to meet you. Great to talk to you and Bill. Always a pleasure.

Dr. Bill Cardoso:
Thanks so much, man. Appreciate your time.

Andre Oliveira:
My pleasure. Thank you. Cheers.

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