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82 SMT007 MAGAZINE I JANUARY 2022 Feature Article by Vernon Densler While obsolescence and shortages have al- ways been an issue, recent large-scale disrup- tions have made the electronic components supply chain even more volatile. Since last December, the global chip short- age has caused pricing shis, lead time delays, and widespread stock- outs. e shortage is bring- ing a higher-than-normal number of counterfeit parts into the supply chain. To a d e q u a t e l y address the prob- lem, it is impor- tant to understand its root causes, ex- acerbating factors, and how its impact can be avoided. What Are Shortages and Obsolescence? Obsolescence refers to parts that manufacturers no longer pro- duce, and vendors no longer car- ry. Traditionally, microelectronic devic- es move into obsolescence aer reaching end- of-life (EOL), the point when their manufac- turer no longer makes, sells, or markets them. Since the item's lifecycle is over, distributors commonly discontinue carrying and provid- ing support for EOL items. Shortages occur when specific electronic components are unavailable or only available in constrained quantities. Bottlenecks com- monly occur when market demand for certain items exceeds the available supply and produc- tion capacity. Shortfalls can sometimes occur when production and delivery are interrupted by natural disasters or geopolitical conflicts. Moreover, parts shortages occur if raw materi- als used in their construction become hard-to-find or unavailable. What Drives Shortages and Obsolescence? Obsolescence is typically driven by a lack of market demand, mergers, acqui s it ions, or product line con- solidation. No t a b l y, r e c e n t events have exacerbat- ed the impact of the latter two factors on the semicon- ductor market. In 2020, vari- ous microelectronics companies announced a record $118 billion in M&A agreements. 1 As those deals con- clude, firms will streamline their combined component portfolios to eliminate redundan- cies and reduce costs. Moreover, IHS Markit revealed in April 2021 2 that chipmakers are increasingly making their aging parts EOL to address shiing end- market priorities. High demand exceeding pro- duction capabilities typically creates shortages. The Impact of Obsolescence and Shortages on Counterfeit Risk