Obsolescence Insurance, a New High-Margin Business for EMS Companies
by 
Virtium Vice President Scott Phillips
It’s common knowledge that the markets for industrial-grade technology – military/aerospace, factory automation and infrastructure, to name a few examples -- differ dramatically from those for consumer and enterprise devices. That’s been the norm since the dawn of the digital age and it’s safe to assume it will continue to be the case well into the future. But how do we define a “norm” in times like these, with the specter of Covid-19 and its far-reaching effects on the global economy?
In “normal” times, the industrial and consumer/enterprise markets march forward on mostly parallel tracks; both adopt new technologies as they become available, though each at a slightly different pace due to differing applications of those technologies. Solid-state storage, for example, at its basic level has widespread use in both – to store data quickly and efficiently -- though the similarities end when it comes to how it’s used.
Solid-state drives (SSDs) designed into embedded systems, Industrial Internet of Things (IIoT) and other applications with stringent demands for reliability and longevity obviously are held to a higher standard than drives designed into everyday PCs and data centers. A key distinction between how SSDs are used is found in the degree to which data must be protected; industrial-grade SSDs collect and store data, of course, but how well they protect data often can mean the difference between the success and failure of a system – indeed, of its entire mission. Imagine if a city’s entire power grid was brought to its knees or a military jet’s flight records were erased due to compromised or missing data.
Industrial applications like in those examples stand out in another way, as well: They’re not subject to the whims of rapidly changing tastes (consumer) or commercial uses (enterprise) that narrow design times. That is, industrial systems are characterized by long design cycles – sometimes years -- and often even longer deployments of the end products.
The data-protecting, industrial-grade solid-state storage solutions for those products fall within the category information technology (IT). In response to the coronavirus pandemic, the U.S. Department of Homeland Security’s Cyber+Infrastructure arm has identified IT as critical infrastructure and “central to the nation’s security, economy, and public health and safety” (read the CISA’s assessment here). But with widespread disruptions to manufacturing, distribution and logistics, manufacturers are asking the gripping question: How can we ensure a reliable supply of the essential products at the heart of IT? In the case of industrial-grade SSD makers, that would be a steady supply chain of flash memory from which they’re made.
Just as they have with their customers, manufacturers have distinct relationships with their suppliers – nurtured over years, if not decades, and ideally to one another’s mutual benefit. Well-established manufacturers who’ve managed their supply chains adeptly, as we at Virtium believe we have, are at an advantage. Having already weathered, along with their suppliers, the unpredictable ups-and-downs in the economy and the consequent supply challenges, they’ve developed strong relationships. Those relationships, coupled with a clear understanding of supply chains’ potential for disruption, help ensure supply reliability and, therefore, stable ongoing business operations. Such relationships have never been more important than they are during challenging times like these.
In the current environment, supply-chain disruptions, combined with lower NAND flash and DRAM output from the major manufacturers and spikes in demand from server/datacenter/cloud applications, create a perfect storm of uncertainty. The results mean extended lead-times, volatile pricing and, worse, supply shortages. It is that much more important to rely on an SSD and memory partner that has long, well-established supply-chain relationships directly with major NAND flash and DRAM manufacturers to mitigate extended lead-times and higher pricing, like those found in the distributor channel. In uncertain times like these, predictability and consistency are invaluable assets that can’t be overlooked.
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