Sourcing ICs During a Global Shortage
In the decline of the global pandemic and the aftermath of Ever Given’s blunder in the Suez Canal, supply chains across many different industries have been affected negatively. One such industry is ICs. One of the major services we provide at Kickstart Design is PCB design, sourcing, and assembly. Recently we’ve been working hard to fulfill and coordinate the completion of the Mutesync Mute button, which required 2 ICs that were running out of stock, luckily with quick pivoting and management, we were able to secure 5,000 units of each IC and ensure the product was on track for success.
Silicon Labs and Microchip Technologies
One hurdle to overcome was working around getting the chips pre-configured so our supplier would not be required to configure and code each unit once assembly was finished. The chips we had selected were from 2 large manufacturers of ICs, Silicon Labs and Microchip Technologies. Aware of the shortage, I quickly got in contact with each of these companies to explain our needs and how they could assist us in programming the chips.
Unfortunately, I was unaware that Silicon Labs is not a distributor of their own chips, rather they sell them wholesale to other distributors such as Arrow, Digikey, Mouser, and Symmetry. I was informed by the Silicon Labs sales team that to qualify for direct distribution of their chips an EAU of 20K units was necessary. With this in mind, I needed to look at the distributor’s inventory, as stock for this IC was swiftly declining. Luckily the Silicon Labs sales team pointed me to a great website for checking stock from every major electronics distributor, in real-time. The website is Trustedparts.com and without this website, I believe we would not have been able to secure stock. After quickly seeing that only 7,000 of our IC were in circulation, we needed to move fast and order them ASAP. Unfortunately, we ended up having to split our order between Mouser and Symmetry, as well as forgo the IC configuration and programming due to the low stock. Luckily our supplier Jinghon Electronics in Shenzhen, CN (anyone looking for OEM products or PCBA’s should check them out) is very flexible and was totally fine with programming this chip.
With the first chip secured I had a sigh of relief and moved on to the Atmel chip made by Microchip Technologies. Unlike Silicon Labs, Microchip Technologies will directly distribute its chips to anyone with a business account, without a large EAU. However, one thing that was not clear to me was that someone from Microchip needs to verify that you are a legitimate business account, which takes up to 2 business days. Unfortunately, I had submitted my application for an account on a Friday afternoon, during this time there were 39,000 of the Atmel ICs in stock. When Tuesday of the following week came around and I was able to purchase after having my account confirmed, the stock of our specific IC had gone from 39,000 to 0 units. This just goes to show there are no guarantees when a shortage of this magnitude happens. Luckily there was a slightly more expensive variant that we were able to switch to and secure.
We had a unique situation with our Atmel chips, as we were still bug-fixing the code and adding new features. Microchip normally has a totally online checkout and code upload process, meaning that when we purchased the chips, we needed to have the code ready for uploading to the ICs. With the time crunch from the declining stock, I quickly called their customer support team to see if there was a workaround. Luckily the salesperson that helped me was able to allow me to purchase the chips and hold them for a short while until we confirmed our code was production-ready. Since then we have submitted our code for programming and are now on track to deliver the pre-programmed ICs for the PCB assembly.
Tariffs and Shipping Logistics
The trade war between China and the US has negatively impacted most small businesses that do business overseas, on both sides. Our business is not immune to this either. Shipping the ICs from the US to be sent to our supplier in Shenzhen incurred a 13% charge on the purchased items.
One interesting trick that some logistics companies started using, is having the goods or packages make a stop at a Hong Kong warehouse. For those who are unaware, Hong Kong is a special part of China that was “owned” and occupied by Britain until 1995, when the territory was returned to China. Many rules, laws, and regulations are different in Hong Kong than in the rest of mainland China. With this, China classifies Hong Kong as a “Special Economic Zone”, allowing it to govern itself more autonomously and in our case, allowing us a workaround for avoiding a 13% tariff charge. Instead only incurring a much more manageable 5% charge.
Looking into the Future
It’s hard to say what the future will hold concerning the global shortage. In this post, I’ve mostly just touched upon our electronics, however, resin shortages are also affecting the product, but not in as much of a dramatic way. One thing is for certain, being able to rethink and quickly change plans is an absolute must for the time being. In the case of product development, building the product around a few key components is usually necessary, but it’s always good to have contingency plans when things (inevitably) go awry. I’m optimistic that in 2022 we’ll start seeing more stability in supply chains, as more people return to work and we have an overall vaccinated population. In short, for the next few months, when developing PCBs, we will be extra cautious about sinking a lot of time or money into a design, only to find our chip has gone out of stock and won’t be available for 52 weeks.
Please feel free to reach out with questions, comments, or corrections on this post, and let us know if you ever need help with anything highlighted here.
