To Repair or Replace? OEMs Reduce Waste by Leveraging Strategic Contract Manufacturing Partnerships

From fixing broken equipment to new RoHS requirements leading to part obsolescence, original equipment manufacturers (OEMs) in the RF and microwave industry have many reasons to replace modules over repairing them. Often, predicting the services necessary in advance of the demand for new product lines or failures in small-to-medium scale manufactured items are simply too difficult to track down and analyze. Different failures can vary in severity, and according to the application, may not be worth the cost to evaluate and correct. Nevertheless, there are organizations whose business model is built around augmenting the efficiencies of OEMs with highly valuable repair and contract manufacturing services.


In the past few years, sophisticated electronic contract manufacturers (ECMs) have evolved significantly—the steady growth and a variety of contracts has allowed for the cost of manufacturing to decrease while the operational competency have increased. The positive feedback loop between an OEM and an ECM can heighten the end-user experience with a minimized customer downtime and enhanced product redesigns. Research and Markets forecasts that the ECM industry is expected to grow to $621 billion by 2019 and was at $460 billion in 2014, this type of growth is preceded by technological advancements in the electronics realm, including automotive, communications, computer, consumer, industrial, medical, aerospace and defense industries.


Analyzing Failures
Designing and manufacturing RF and microwave requires an advanced, and highly specific, level of expertise, which differs from standard ECM. For example, a complex integrated microwave assembly (IMA) may require full RF test facilities--up to millimeter wave testing capabilities, environmental testing, tuning, and experienced RF and microwave technicians. More often than not, the seemingly easiest solution for an OEM  is to junk the broken equipment and replace it, as opposed to patching it up and analyzing the cause for failure. While the solution may seem elegant at first glance, it can cause potential disruptions down the supply chain line. Simple failures can go overlooked and may compound unnecessarily. For instance, the addition of lead-free solder to electronics led to ‘tin whiskers’, or spontaneous spurs from tin-based surfaces, and cost over $1 Billion in field failures from electrical shorts and current leakage. This failure affected the entire electronics industry including military, commercial, and communications applications. A cohesive partnership between ECMs and OEMs can provide a desirable alternative that actively maps and attacks failures as they arise, while lowering costs and increasing profitability for both parties. 


Overhauling the Obsolescent 
As new technologies and techniques emerge, obsolescence of components, subassemblies, and assemblies is inevitable. In 2015 the US Army spent more than $300 million for demilitarization, recycling, and disposal of munitions that had become obsolete. According to IHS technology, the end-of-life activity for global chipmakers more than doubled from 2005 to 2014. While this has stabilized somewhat, semiconductor companies continue to halt production due to shorter product lifecycles. 

In the radio and telecommunications market product, obsolescence is a common reality, with the consistently growing demand and perpetually innovative competition. Repairing, recycling, and reusing components and subassemblies from last-generation technology requires careful tracking and strategizing. Parts that go obsolete, but still have a level of utility, may require component upgrades and retesting to original specifications. However, these costs may be a cost effective alternative to replacing or reinventing a new product, and potentially even more so considering the very high early costs of new RF and microwave technologies.


The recycling and servicing of legacy components has often been sourced to ECMs’ in order to streamline the supply chain of an OEM. Also, leveraging an ECM may enable an OEM to concentrate their human capital on the profit centers of their business, instead of managing losses. 


A Competitive Advantage
Almost 8% of America’s gross domestic product is generated by after-sales services and spare parts-- almost $1 trillion, according to research firm Aberdeen Group. The electronics and RF industry is not exempt from this trend, and aftermarket services may be just as valuable to a company’s integrity and profitability. Especially in areas of developing technology areas and the production of high-reliability (Hi-Rel) systems. Contract manufacturers are now providing solutions for OEMs to avoid overcompensation losses when reacting to failures, by providing proactive planning and servicing of unpredicted failures and when upgrades are viable. A good pairing between an OEM and ECM can lead to a competitive advantage and a slight edge in after-sales customer service. 

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