security, economics, technology and the sustainability paradox

Copyright © 2011 IHS Inc. All Rights Reserved. 1

Security, Economics, Technology and the Sustainability Paradox

Rory KingDirector, Design & Supply Chain, IHS Inc.

Scott WilsonContent Strategist, Design & Supply Chain, IHS Inc.

Day 2 – 29 June 2011


IHS – A leading information provider

2

Energy &

Power

Design &

Supply Chain

EHS &

Sustainability

Defense, Risk &

SecurityCountry & Industry

ForecastsCommodities,

Pricing & Cost

• Tens of thousands of customers and hundreds

of thousands end-users in 180+ countries

• Customers include nearly 70% of US

Fortune1000; 80% of Global Fortune 500

Strong, Growing Products and Financials:

• Public, NYSE: IHS (2005)

• Revenue: $1.1B (2010)

• Founded in 1959: To provide product

catalogs for aerospace engineers

• Today: Leading global source of critical

information and insight dedicated to

providing the most complete and trusted

information and expertise

• Employs 5,100 people in 30 countries

Areas of Expertise & Content


About Us: IHS Design & Supply ChainCore capabilities we’ll leverage in our discussions today…

Part Search & Research

BOM Analysis

• Lifecycle

• Availability

• Compliance

• Counterfeits

• Alternate Parts

EOL / PCN Alerting and Mgmt.

Supply Chain Teamwork

Counterfeit Part Risk Mgmt.

Supplier Risk Mgmt.

Compliance and Lifecycle tracking for parts outside reference databases

Product Regulation Tracking

Specs and Standards

Electronics Supply Chain Analysis

• Teardown

• Comp. Price Tracker

• Inventory Tracking

• Forecast

Macro Economic Analysis

Commodity Price Forecasting

EIATRACK

Standards

Expert

Content

Services

ERAI

CounterfeitsPCNAlert

Parts Universe

& BOM

Manager IHS iSuppli

PCN & EOL

IHS Global

Insight


Paradox: Stakes Higher Than EverBelief that meeting client requirements is possible using traditional methods

REQUIREMENTS

• Sustainability

• Customer

Requirements

• Supplier

Requirements

• Extended Product

Lifetimes

• Through-Life

Performance

• Security & Safety

RISK DRIVERS

• Economy & Markets

• Workforce Churn

• Environmental

Regulations

• Conflicts

• Counterfeiting

• Acts of Nature

• Competitive

• Export Controls

CONTINUITY

RISKS

• Constrained

Supply &

Availability

• Obsolescence

• No longer

compliant with

client’s

requirements

• Counterfeits

• Excess &

Obsolete

Inventories


Paradox: Stakes Higher Than EverBelief that meeting client requirements is possible using traditional methods

RE

QU

IRE

ME

NT

S

RIS

K D

RIV

ER

S

EOL increase of 40% CAGR

PCN increase of 40% CAGR Military / Aero < 2% of Market

Counterfeits increase Steeply

Shortage and Allocation Issues

38.0%

6.3%

19.8%

19.1%

7.5%

7.3% 1.9%Data Processing

Wired Comms.

Wireless Comms.

Consumer Elec.

Automotive Elec.

Industrial Elec.

Military / Aero

Capacitors

Flexibility

Lead

Time

(Weeks)

Global

Pricing

Trend

Flexibility

Lead

Time

(Weeks)

Global

Pricing

Trend

Flexibility

Lead

Time

(Weeks)

Global

Pricing

Trend

Q4 2011 18 0.9% 14 -0.4% 20 -0.7%

Q3 2011 18 1.9% 14 1.3% 20 1.0%

Jun-11 18 14 20

May-11 18 1.1% 14 0.8% 20 0.4%

Apr-11 18 1.2% 14 1.1% 20 0.7%

TantalumAluminum Ceramic

Fo

recast

Disclaimer of Warranty and Limitation of Liability

Component Price Volatility


Today: Dynamic Supply Chain Context is Vitalof Client Requirements and External Forces

Material

Mfrs.

Component Mfrs. Product Mfrs.

(OEMs and EMS)

End Users

Supply

Demand

Materials

Product Trends

• Technology

• Features

• Cost

• Energy Efficiency

• Competitive

Regulations

• RoHS

• REACH

• Conflict

Minerals

• Export Controls

Part Trends

• Technology

• Demand

• Supply

• Obsolescence

• PCNs

Economy

• Market volatility

• Product

demand

Application Markets

Unique Trends & Pressures

• Computing

• A&D

• Consumer

• Medical Dev.

Supply

• Natural Disasters

• Raw Materials

• Regulated Materials

Costs

• Supply

• Energy and Shipping

costs

Product Stewardship &

Extended Producer

Responsibilities

• Client requirements

Products

Components

Supply

• Counterfeit Parts

http://images.google.co.uk/imgres?imgurl=http://www.pcbmanufacturer.info/images/circuit_board/circuit_board_250x251.jpg&imgrefurl=http://www.pcbmanufacturer.info/result.php?Keywords=Pcb Manufacturer&usg=__4e1nPAeXePs7BvYf5jFKMx8vbZ0=&h=251&w=250&sz=23&hl=en&start=16&um=1&tbnid=6FVaenI13NcdzM:&tbnh=111&tbnw=111&prev=/images?q=pcb+manufacture&hl=en&rlz=1G1GGLQ_ENUK330&um=1

http://images.google.co.uk/imgres?imgurl=http://www.utilisegold.com/assets/image/science/electronics_files/bwire1.jpg&imgrefurl=http://www.utilisegold.com/uses_applications/electronics/gold_bonding_wire/&usg=__jbJ0BWM_09y0bWs9xIGx2mbZ4hw=&h=208&w=250&sz=15&hl=en&start=1&tbnid=XuhbKmrEAv1s-M:&tbnh=92&tbnw=111&prev=/images?q=gold+bonding+wire&gbv=2&hl=en

http://images.google.co.uk/imgres?imgurl=http://www.cumulus-soaring.com/lx/LX-Cable-PC-700x.jpg&imgrefurl=http://www.cumulus-soaring.com/lx.htm&usg=__xpnrMjD4wZte3CGwd6oW5wArWAY=&h=433&w=406&sz=44&hl=en&start=20&tbnid=5MM1bVsW_T92hM:&tbnh=126&tbnw=118&prev=/images?q=PC+connectors&gbv=2&hl=en&sa=G

http://images.google.co.uk/imgres?imgurl=http://www.coloradogem.com/images/2378_big.jpg&imgrefurl=http://www.coloradogem.com/index.php?display=min2&usg=__H0qluKQLSUbtMWP-drOjVXB1aA8=&h=672&w=700&sz=121&hl=en&start=3&um=1&tbnid=Fvclvl8wLA1BdM:&tbnh=134&tbnw=140&prev=/images?q=tin+mine&hl=en&lr=&rlz=1G1GGLQ_ENUK330&um=1

http://images.google.co.uk/imgres?imgurl=http://cache.daylife.com/imageserve/08NheOR35Jfzr/610x.jpg&imgrefurl=http://www.daylife.com/photo/08NheOR35Jfzr&usg=__0Kv_cZu4Rf_79O_hLywj5R-PZqU=&h=466&w=610&sz=45&hl=en&start=3&um=1&tbnid=9mGjX3xHCXAhGM:&tbnh=104&tbnw=136&prev=/images?q=metal+refinery&hl=en&rlz=1G1GGLQ_ENUK330&um=1


Dynamic Context: Inherent in EOL Trends Cited reasons for manufacturer obsolescence of parts

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008 2009 2010

Unspecified / Administrative

Supply Side

Organizational (Company, Manufacturing, Product Consolidation/Rationalization)

Innovation, Technology, and Manufacturing

Environmental Compliance

Demand-Side

RoHS

Ec

on

om

ic Im

pa

ct

~90

% o

f E

OL

(2

00

9)

Te

ch

< 2

5%

Ro

HS R

oH

S

Ro

HS

Ro

HS


Correlation: Economics and EOLDemand drives Obsolescence: Track MSI production volume and EOLs

.00

.05

.10

.15

.20

.25

.30

.35

.40

.45

.50

.55

.60

.65

.70

.75

.80

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

2,100

2,200

2,300

2,400

2,500

2,600

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Semiconductor MSI (Right Scale)

End of Life Parts % of Total Parts

IHS EOL insight found “demand side” primary reason for 90% of EOL

actions in 2009, vs. more typical 15-20% citations during 2004-2008

Millions Square Inches Silicon Processed - Semi

Parts: IHS Electronics Database

6 mos


Correlation: EOL and CounterfeitsObsolescence and constraints/allocation pose significant risk

Source: IHS Inc. 2011


Back to Basics: PCN & EOL ManagementSupply chain continuity between manufacturer and customer are critical

JEDEC: Standards for the Worldwide Semiconductor IndustryNotification of such Product, Process, and End of Life notifications between Semiconductor

Suppliers and their customers.

Source: JEDEC

Product or Process Change Notice (PCN)

JEDEC Standard No. 46C

• “A document sent to customers describing

product or process changes, the reasons

for the change, and the projected impact of

the change.”

• “Establishes procedures to notify

customers of semiconductor product and

process changes.”

Product Discontinuance or End-of-Life

Notice (PDN/EOL)

JEDEC Standard No. 48B

• Standard applicable to suppliers and

affected customers of electronic

components.

• “Establishes the requirements for timely

customer notification of planned product

discontinuance, which will assist customers

in managing end-of-life supply, or to

transition ongoing requirements to alternate

products. This is to ensure continuity of

supply to customers.”


EU RoHS Recast

EU REACH & SVHCSIN List - Substitute It Now!

US California Proposition 65

EU Battery DirectiveENERGY STAR

ISO 14064 GHG Standards Norway PoHS

Carbon Disclosure Project (CDP)

Electronic Product Environmental

Assessment Tool (EPEAT)

Japan Green

Priority Declarable Substances List

(ASD PDSL)

Environmentally Preferred Products (EPP)

Regional Greenhouse Gas Initiative (RGGI)

PCF - Product Carbon Footprint

UN Stockholm Persistent

Organic Pollutants (POPS)

US FDA

China RoHS

Thailand’s “RoHS”

US EPA Executive Orders

Toxic Substances Control Act (TSCA)Health Canada / Canada’s Chemical

Management Plan

Customer RFP

Full Material Disclosure

Product Content Disclosure

Lifecycle Assessment (LCA)Water

Hazardous

Substances

Energy

Waste

DEHP-Free

Bisphenol-A “BPA Free”

Volatile Organic Compounds

Air Safety

Health

Security

Natural Resources

Argentina RoHS

EU RoHS and WEEE

Directives

Greenpeace

EU Medical Device Directive

EU RoHS and WEEE

Directives

Compliance: Pressures Continue to SoarRegardless of exemptions these have a ripple effect on materials used

Conflict Minerals


Not Just RoHS: EU-REACH and othersWill lead to more supply chain disruptions; accelerate DMSMS

Obsolete Substances (not pre-registered; can not take advantage of phase-in registration)

Obsolete

Obsolete Substances (not registered by phase-in deadline)

Obsolete Substances (not registered by phase-in deadline)

Substances not requiring registration (naturally occuring such as minerals, ores; basic elemental such as hydrogen, oxygen, noble gases...)

Obsolete Substances / Restrictions on Dangerous Substances (Annex XVII)

Dec 2008 Dec 2010 Dec 2013 Dec 2018

time

REACH timeline showing anticipated obsolescence of substances and associated supply disruptions

Su

bs

tan

ce

s R

eg

iste

red

Pre

-re

gis

tration

Registration:

CMR > 1t/yr.

Very Toxic to Aquatic > 1t/yr.

Substances > 1,000t/yr.

Registration:

Substances > 100t/yr.

Registration:

Substances > 1t/yr.

SVHCs (Annex XIV)

Represents a supply chain disruption


“The presence of counterfeit

electronic parts in the Defense

Department’s supply chain is a

growing problem that government

and industry share a common

interest in solving.”Carl Levin, D-Michigan, and

Sen. John McCain, R-Arizona

March 2011

Security & Safety: A Greater PriorityU.S. congress investigates counterfeit parts in DOD supply chain


BOM Benchmark: 0.5 – 5% of Parts at RiskTypical BOM has roughly 0.5 to 5% match to ERAI reported incidents

Shown: IHS-ERAI


Suppliers: No One Immune from RiskLack of accountability and traceability allows counterfeits to enter

“It is not uncommon, however,

for authorized distributors to

purchase parts outside of the

OCM supply chain in order to

fulfill customer requirements –

58 percent purchase parts from

other sources.

Specifically, 47 percent of

authorized distributors procure

parts from independent

distributors, 29 percent procure

from brokers, and 27 percent

procure from Internet-exclusive

sources.”

Source: U.S. Department of Commerce,

Office of Technology Evaluation,

Counterfeit Electronics Survey,

November 2009.


Semiconductor Fabs

1 Aizu Wakamatsu, Fukushima

ON Semiconductor (Logic)

Fujitsu (Analog, Discrete, Memory)

Texas Instruments (Analog, Optical)2 Atsugi, Kanagawa

Mitsumi (Analog, Logic)3 Goshogawara, Aomori

Renesas (Logic)4 Gunma

ON Semiconductor (Discrete, Logic)

Renesas (Analog, Discrete)

5 Hitachinaka, Ibaraki

Renesas (Logic, Micro, Memory)

6 Iwate

Fujitsu (Micro, Memory)

Toshiba (Discrete)7 Kofu, Yamanashi

Renesas (Analog, Logic, Micro)8 Miho, Ibaraki

Texas Instruments (Analog, Optical)9 Miyagi

Fujitsu (Logic, Micro)

Rohm (Discrete, Micro)10 Sendai, Miyagi

Freescale (Logic)11 Shiroishi, Miyagi

Sony Semiconductor (Logic)12 Tsukuba, Ibaraki

Rohm (Discrete)13 Tsuruoka, Yamagata

Renesas (Logic)

14 Utsunomiya, Tochigi

Matushita (Discrete)

Natural Disasters Affect Global SuppliesJapan produces over 50% of silicon wafers globally

Silicon Wafer Production

A

B

C

D

Shin-Etsu Kamisu, Ibaraki

Shin-Etsu Nishigo, Fukushima

MEMC Utsunomiya, Tochigi

SUMCO Yonezawa, Yamagata

Display Manufacturing Hitachi Displays

Panasonic LCD

Tohoku Pioneer

Resins, Films, Chemicals,

Copper Clad Laminate…

Fukushima

Epicenter

A

B

D

C

1

3

2

4

Tokyo7

6

85

910

11

12

14

13

Source: IHS iSuppli 2011


Japan Disaster Impacts: EOL / PCN Shown: Damaged tooling in the earthquake leads to obsolescence

Source: IHS Inc. 2011


Conclusion: Anticipate supply chain eventsto maximize time to react before program impact

Supply Chain

Event

Economic

Event

Supply Chain

Availability

Program

Impact

Track Supplier

Inventories and

ForecastsTrack

EOL/PDN

Track Economic

Events

Track Supplier

Inventories and

Forecasts

Time

Time before

program impact

Supply Chain

Trend

!

Other Events:

• Natural Disasters

• Export Policy /

Supply

• Environmental

• Conflict


Approaches: Economic Forces/ImpactsAcknowledge and monitor entire global value chain dynamics


Approaches: BOM ManagementAllow for the ability to move from risk identification to risk mitigation

From Manufacturer & Commodity To End Units Impacted

• Identifying Components In My Business

• Linking Down To BOMS & End Devices

• Prioritize Key Components/BOMS/Devices

• Identify Component Risk

• Identifying Sources Of Inventory

• Leverage Alternate Sourcing Tools

• Identify Mitigation Plan Working With Suppliers

• Develop Counterfeit Mitigation Plan

• Longer Term Impacts


2003 2004 2005 2006 2007 2008 2009

End of Life (EOL)

Specific to RoHS/Pb-free Environmental Compliance

Obsolescence PCN/EOL to Detect Issues Price/Lead Time Counterfeit Incidents

Approaches: Performance MeasuresEnsure alerts and performance indicators updated for today’s risks

Qualify

+ Approve

Manage

+ Avoid

Validate

+ Detect

Report

+ Resolve

Redesign

+ Resupply

Establish infrastructure to

mitigate risk through qualified

and approved designs,

suppliers, & parts.

Update processes, tools, and

information to avoid

counterfeit and high risk

parts.

Validate, sample and test

components for authenticity.

Quarantine suspected

counterfeits.

Procedures to notify

stakeholders, report

occurrences, and resolve

incidents.

Maintain controlled

design/redesign cycles of

products. Optimize parts,

inventory, and suppliers.

Challenge

…mission failure!

Economic downturn…

Environmental Compliance…shortage… …fake parts…

Establish Workflow

Introduction

Growth

MaturityDecline

Phase-Out

Obsolete

Performance Management


Thank You

Rory King,

Director Design & Supply Chain, IHS Inc.

[email protected]

Scott Wilson,

Content Strategist, Design & Supply Chain, IHS Inc.

[email protected]

mailto:[email protected]

mailto:[email protected]

security, economics, technology and the sustainability paradox

Technology

ihs eol insight

ihs electronics database

dynamic supply chain

demand product mfrs

shipping client requirements

vitalof client requirements

end of life parts

product tens of thousands