Chris Waldron’s article in September’s issue of Electronic Sourcing – Navigating supply chain challenges and rising costs – examines how procurement teams can avoid pitfalls and reduce risks by choosing their supply chain partners strategically. When buyers face long lead times and volatile pricing, Chris advises discipline, buffer stocks and open communication with supplier partners who work proactively with their customers.
Read it below or here in the online magazine.
The semiconductor market remains challenging for procurement teams. After years of supply chain disruptions, many hoped we’d see a return to normalcy by now. Instead, we’re dealing with extended lead times, volatile pricing and suppliers who sometimes promise the moon but deliver very little.
The key isn’t to panic or chase every lead. It’s to build a strategy that acknowledges today’s market reality whilst protecting your business from unnecessary risk.
The current state of play
Strong demand for AI chips and capacity constraints are causing foundry lead times for advanced nodes to extend. High-end GPUs and advanced packaging are particularly problematic. Meanwhile, foundry capacity for legacy components like MCUs and analogue chips is now rebounding.
GPU availability remains patchy, with lead times that can stretch to 20 weeks depending on specification. Memory components show similar patterns, particularly DDR5 modules and high-density flash storage. NAND flash bit supply remains constrained, with capacity increases lagging surging AI device demand.
The pricing picture isn’t much rosier. Recent geopolitical tariffs are raising chip prices, forcing OEMs to reallocate spending and restructure supply relationships. What makes this particularly frustrating is suppliers who continue quoting unrealistic lead times. Procurement professionals hear “8-10 weeks” only to have that stretch to 6 months.
Building buffer stock without breaking the bank
When facing long lead times, the temptation is ordering everything you might need. That’s expensive and risky as you might end up with a surplus of stock you don’t need and can’t store. Instead, focus on buffer stock for your most critical components.
Start by identifying which semiconductors are truly irreplaceable in your design. These are your priority items for buffer stock. For everything else, work with your engineering and supplier team to identify suitable alternatives beforehand.
Maintain a buffer stock level that works with your production volumes and cash flow. Your distribution partner can provide valuable guidance on optimal stock levels and help you refine this strategy based on your specific needs and market conditions.
The art of early ordering
Forward planning has become essential, but it demands discipline. The key is balancing inventory costs against the risk of production delays, which requires honest conversations with your sales team about demand forecasts.
Many companies get burned by ordering too early based on optimistic projections, while others miss market opportunities by waiting too long to place orders. The sweet spot typically involves ordering 3-4 months ahead of immediate needs, though this varies significantly by component type. High-value items like processors often warrant shorter lead times to minimise capital exposure, while lower-cost but critical components may justify longer ordering times to ensure availability.
Choosing the right partners
The semiconductor market has separated the wheat from the chaff regarding suppliers. Those worth working with tell you the truth, even when it’s not what you want to hear, and communicate regularly. They warn about potential delays, suggest alternatives and help you plan around constraints upfront.
Look for suppliers who have qualified alternative components rather than offering to “look into it” when your preferred part becomes unavailable. Also seek ERAI (Electronic Resellers Association International) members. This membership demonstrates commitment to preventing counterfeit components entering the supply chain.
Alternative components: your insurance policy
Having pre-qualified alternatives is essential – but this must happen before you’re desperate, not after your primary supplier has let you down.
The best suppliers understand this reality and maintain pre-qualified alternative databases. They communicate openly about substitute options and work proactively with your engineering team, identifying drop-in replacements for key components. When supply disruptions hit, these partners pivot quickly without leaving you scrambling.
Communication remains the cornerstone of successful alternative component strategies. Your supplier should update you regularly on market conditions and potential substitutes, not wait for you to ask.
Managing expectations internally
One of the biggest challenges is managing expectations within your organisation. Sales teams want quick delivery promises, finance wants minimised inventory costs and engineering prefers proven components.
Your job is to be the voice of reality in these discussions. Use data showing the true cost of component shortages versus holding buffer stock to make semiconductor sourcing a strategic advantage rather than constant firefighting for buyers.
Thriving in uncertain times
The semiconductor market won’t return to predictable patterns anytime soon. New technologies, geopolitical tensions and changing demand patterns mean volatility is here to stay.
Success requires careful planning, strong supplier relationships and realistic expectations. Stay flexible and communicate across the supply chain whilst maintaining discipline. Most importantly, work with suppliers who understand that your success depends on their honesty, not optimism.
Chris Waldron is Director of EMEA at Solsta