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As the global components shortage drags on, efforts toward supply chain resilience are escalating. System on module (SoM) designer and manufacturer Variscite, for example, has increased its agility though a 25 percent expansion of its in-house production capabilities.
Variscite CEO Ohad Yaniv
“There is no manufacturer that is assembling an electronics product today that has not run into supply issues,” said Variscite CEO Ohad Yaniv. Getting modules into customers’ hands as early as possible wards off numerous complications down the line, he explained. The new production line ensures delivery times as fast as four working days.
SoMs are small embedded computers that integrate necessary system functions into a single module including a processor, memory, and I/O controllers. Variscite serves customers in the highly-regulated automotive and medical industries as well as agriculture, control systems and multimedia.
Resilience, in supply-chain parlance, is the ability to navigate unexpected disruptions such as supply constraints. An electronics company in the healthcare market maintains a supply base within 200 miles of its factory, for example; another focuses on quick-turn prototypes of PCBs. The lack of a single component can stall manufacturing lines, but modifying a device can create its own set of problems. Customer communication is paramount, executives say.
“If you or your customer has to redesign a product with a different component it is a hassle, but there are also complications and risk with an alternative part,” Yaniv explained. “It’s not just money—it’s resources and it can bog you down for months if you have to take one version of a module and replace it with another.” Even if a SoM’s hardware interface doesn’t change, software modifications may have to pass muster of regulatory labs. Revisions, he said, could consume months’ worth of resources. “On the operations side this is becoming more of an issue due to component supplies.”
In addition to condensing its production cycle, Variscite is:
- Placing orders of supplies early and building buffers to compensate for interruptions
- Finding alternative sources of components that have low availability
- Producing at least partial quantities of components as soon as it has materials so that stock will be ready for orders when needed
- Leveraging relationships with NXP and other long-term partners to ensure priority supply replenishments
Variscite sources high volumes of components and is therefore an important customer to its suppliers. “Those economies of scale are working to our advantage,” said Yaniv. Like most electronics companies Variscite aims for lean inventory management but is adjusting in the current supply environment. “We are placing orders several months ahead of time as product lead times continue to stretch,” he said. By maintaining production levels through the Covid pandemic, the company is a good financial position to maintain inventory levels even if customer demand shifts.
Variscite production facility
Even with these measures, Variscite has faced component substitutions. Manufacturers are now advising customers on the long-term viability of component selection. A recent survey found a majority of electronics companies — 64 percent — are basing their designs on the availability of components rather than preference.
During prolonged periods of component scarcity, electronics manufacturers may extend their procurement efforts beyond their authorized and established partners. Authorized sources include component manufacturers and the distributors they franchise. Non-authorized channels can verify the authenticity of their parts but less-reputable resellers remark or otherwise tamper with devices. The risk of procuring a counterfeit increases in this so-called gray market.
Variscite’s policy is to never procure from non-authorized sources, said Yaniv, even if customers will tolerate a higher level of risk. In some cases Variscite will split orders – deliver the modules they have – so customers can maintain production. “The level of risk from faulty parts is just too high,” Yaniv said. “We know this because customers have sourced outside authorized channels – not for our assemblies – and have seen systems fail.”
The SoM market was estimated at around $1.5 billion in 2020 and is poised to grow at a CAGR of 12 percent from 2021 to 2027, according to Global Market Insights. Increasing demand for self-driving automobiles and advancements in autonomous and unmanned technology are the major factors propelling the market growth.
SoMs are also experiencing high demand from safety systems such as ADAS, drivetrain and fuel injection systems, and infotainment systems. The growing integration of electronic equipment into smart cars, to allow continuous communication and wireless networking across vehicle systems, supports the market expansion. Major players in the automobile industry, such as Toyota, Ford, Tesla, and Renault, have already started developing completely autonomous vehicles, encouraging the OEMs to launch new automotive-grade products.
Of course, the automotive industry has suffered significantly due to the global shortage of semiconductors which some experts expect will last into 2023. “It’s been going on so long that even if you have buffer inventory at some point you are going to get stuck,” said Yaniv. “Everyone’s running into the same supply issues.”
