What Every Hardware Startup Should Know About the Electronic Component Landscape
Pulse
Octopart Staff
Oct 10, 2017

lifecycle_status

In my last blog I gave a broad overview of the electronic component purchasing landscape. This time I’m going to dive deeper into some issues of particular interest to hardware startups.

NRND - Here be Dragons

Most component manufacturers manage the "lifecycle status" of their components. The biggest red flag when working on a new design is a lifecycle status of “NRND” (Not Recommended for New Designs). You may have no problem buying small volumes of these components, but when you’re scaling up for a production run and you can’t source enough chips from an authorized distributor you're going to be very, very unhappy.

You can find lifecycle status information on manufacturer websites, or through us.

Authorized vs. Non Authorized Distributors vs. Brokers

Authorized distributors only source components directly from the manufacturer so you can be sure that the components you receive are authentic and have been stored and handled correctly. Buying from an authorized distributor or directly from the manufacturer is the recommended ways to buy components.

We clearly indicate which distributors are authorized on Octopart and we display them above everyone else.

You might find that authorized distributors have no stock but a non-authorized or “independent” distributor does. Buying from an independent carries some risk, such as receiving damaged or counterfeit parts. The ERAI monitors this channel and can help you in mitigating risk if you need to go there.

Sometimes you really can’t find a part in stock anywhere and you need a broker to scour the excess inventories of other companies. This is the riskiest, and often most expensive way to procure components. If you’re designing a new device and you’re working with a broker to procure parts, you’re doing it wrong.

Compliance Documentation

The time to collect documentation on RoHS and REACH compliance is during the design phase. Don't wait until you've designed your board around a non-compliant part! Compliance documentation is also available through the component manufacturer, or through us.

Shop Around

If you’re designing around a type of chip manufactured by more than one company, take advantage of your leverage! A few calls to salespeople can yield great results, especially if you can convince them that your product is going to have big volume down the road. Distributors sometimes receive pricing incentives from manufacturers to get the manufacturer’s part into a new design and you may be able to get some of those pricing incentives passed down to you.

Identify Alternates, Avoid Single Sources

If possible, choose parts that have drop in replacements made by multiple manufacturers, and specify exactly which are acceptable replacements in your bill of materials (BOM). This is good practice not only with semiconductors, but with passive components too. Your contract manufacturer will thank you. No one likes a stopped assembly line because of an unavailable single sourced part.

Watch Out for Partial Reels

At volume, you’ll get better pricing if you buy full reels. If you need 4000 chips and each reel holds 2500, and after buying two reels, you'll be left with a partial reel of 1000 unused chips. Contract manufacturers may not credit you for partial reels so don’t assume you’ll only get charged for the parts you use. Come to an agreement about what happens to excess beforehand.

Scaling Up, Get More Than Just Better Pricing

In addition to better pricing when you scale up your purchasing volume, you can also negotiate better payment terms, allowing you to postpone payment of the components until 30 days (or more) after delivery. Or you may be able to get a distributor to guarantee available stock at a fixed price in the future which mitigates the risk of parts going out of stock and price fluctuations. It’s worth making some phone calls and shopping your BOM around to different distributors to see what kind of deal you can get.

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