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Chip Life-Cycle Guarantee is Key to Vendor Confidence

No-one wants to keep redesigning products just because CPUs and memory chips are obsoleted. But that’s the continual risk when semiconductor fabs have a lifetime of roughly eight years.  Up to one third of design resources can be used just keeping a product on the market. Subsequent price rises and delivery delays can be fatal. So, Hilscher’s policy for its netX chip family has always been to guarantee supply for a minimum of 10 years, with an End-of-Life strategy of structured buying opportunities and component upgrades in support. This guarantee is constantly under review with current netX chips reaching well beyond the 10 years of support.


As a key communications chip supplier to the automation industries, Hilscher has a critical responsibility to support customers with guaranteed supply terms.  Hilscher has always assured 10 years of supply for its netX product family, with a clear ongoing End-of Life purchasing offer that supports particular needs even as production volumes start to drop.  However, it’s obviously vital for Hilscher to take advantage of latest semi-conductor developments, as Moore’s Law remains in force and automation demands constant innovation.


This puts Hilscher - and similar companies - in a special position: it has to maintain supply in order that its customers’ product families can enjoy market continuity and yet it has to keep abreast of (ahead of, actually) the innovations that ensure both sides remain competitive.


It’s a delicate balancing act, but as a chip vendor it’s critical to Hilscher’s market credibility - and eventual business success - that the balance is properly maintained. The chart below shows how this works in practice.

 

 

Part of the management process is the netX supply guarantee.   Hilscher is constantly seeking improvements from the semiconductor fabs and in some cases that 10-year guarantee can be exceeded.  Recently we were able to confirm that our first chips will be available for an amazing 26 years!   It is not guaranteed that we can always do 26 years but stable long-term supply management is a priority topic to us.


To back this up, Hilscher offers a structured purchasing policy which sees customers cautioned well in advance about possible End-of-Life (EOL) issues and offered preferential supply guarantees. There’s an 8-step process. Below is a summary of how it works:

 

StepCustomer Alert ProgramTime Scale for Customer Response
1Reminder of availability dates for netX types6 – 12 months before official start of Lead Out
2Determination of planned quantities with customerUntil official announcement of Lead Out with date of Last Time to Buy (LTB)
3Binding agreement for customer‘s remaining quantitiesWithin 6 months before date of LTB
4Optional agreement for a safety stock as service (storage contract)Before LTB date
5Optional agreement for a long-term storage of netXDepending on the customer‘s needs
6Binding order for framework contracts (may exceed last delivery date)Latest at LTB date
7LTB - last opportunity for normal orders of netXOne year before last delivery
8Last delivery of discontinued netX chipsLast chance to get chips delivered, except the optional agreements for storage contracts