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Scarce chips

Explanation

Scarce chips are chips of which there just aren't enough of at a certain moment in time.
It can be because:

Too little are produced:
- The manufacturer stopped producing them.
- The follow-up manufacturer (like Lansdale) hasn't managed to take over yet.
- The demand was underestimated.
- Technology hasn't caught up with (sudden rissen) demand yet.
Too many are demanded:
- Products using these chips live longer than estimated.
- A certain chip gets popular at once (new processor, bigger memory).
- Old products need to be repared after a long while.

Some more definitions:

Obsolete chips are chips that are no longer produced
'Chips on allocation' are chips that can't be produced in large enough numbers yet, so chip manufacturers try to divide them between the several interested parties.

Solutions:

Don't use too obscure chips.
Some companies don't use chips that aren't second sourced.
Some companies try to produce all their key chips themselves.
Let the manufacturer know when you will need large amounts of their chips. (They have to schedule these processes anyway, since they're generally made in batches.)
Have your distributor keep enough stock of the chips you regurarly need.
When a chip is discontinued, order enough during the final ordering phase! (Difficult of course ;-) (Perhaps you can find a chip broker or bank to finance this.)
If you're using small amounts of chips, choose popular ones, so you'll always be able to get the leftovers of the regularly made batches.
Interest a secondary chip manufacturer to take over the production of the chip.

If everything else fails:

Chip brokers try to help companies to locate missing chips, which isn't easy with about 1.5 million different chips out there!
Some (the so called 'stocking brokers') buy left-over stocks from OEM's, smaller distributors, retailers or whoever has chips left and stock them, until there is a demand for them.
These brokers and also the non stocking brokers try to help their clients by finding large enough amounts of the missing chips.
To this end they are in constant contact with other (stocking) brokers.
This is of course done via telephone, fax, email and the WWW.

Another function of chip brokers:

Some brokers also take care of getting ALL the chips their clients need.
When you have a production company and want to focus on getting or keeping the production going, it's easy when you can leave the buying part to someone else, because getting 80% of the parts is very easy, getting 95% of the parts is still fairly easy but costs more time, but getting 100% is a LOT of work!
And in the mean time you may also have to be setting up a production line, hiring people, arranging packaging materials and arranging silly things like heating in the production halls etc.
Developing and maintaining such a network of chip contacts is a lot of work and you may only need it several times a year when you're a small production company.
Brokers can also drive a much harder bargain for you, although they will need their percentage of course.
In conclusion: Viva El Chip Broker! ;-)

Obsolete part production

When a (big) company stops production of a part the production rights are sometimes sold to a smaller company. Lansdale specializes in this.

What is the difference between a distributor and a chip broker?

Distributors generally represent one or more manufacturers and keep stock of their products, but of nothing else and only as long as they are stocked by the manufacturers. They represent the manufacturers more or less and help them in distributing their products over the globe.
Brokers represent the client and try, by consulting with (stocking) colleagues and distributors, to get the chips their clients need.
Is the distinction really that clearly? No, distributors will also do brokerage sometimes when they 'smell' a profit. They'll even buy from their competing distributors without telling you and take a loss just to keep you as a client. ;-)
Are there fixed prices for chips? No, these people are all traders and there isn't a constant flow of the 1.5 million kinds of chips, so offer and demand determine the prices. They won't systematically sell under their buying price of course and yes they charge more to clients that don't complain much...

Chip brokers

List of chip brokers

Harsh realities

To give you even more insight in how the trade in scarce chips goes.(The following may be shocking to the unexperienced.)

(Names are changed to protect the innocent.)

Date 19970618

To chipsbuyer@oem.com

From Jaap van Ganswijk <ganswijk@xs4all.nl>

Subject Re: Chips being sought

At 22:40 1997-06-17 -0400, 'chipsbuyer@oem.com' wrote:

I am stil seeking the LM9999. I had a note from someone that had some, but
the price was way high. I would buy 1,000 pcs now at $1.75.

If that was from 'Chips Broker, Inc.' (which helps me with these issues)
I can't do much more...

When things get scarce the prices go up. It's either buying the obsolete components at the price the offerer wants (not 'Chips Broker, Inc.', but the source they have found for you) or redesign your product.

There is unfortionately no magical warehouse somewhere over the rainbow that stocks all 1 million (?) obsolete chips in abundance...
You can also wait for a long time or forever (?) until new (old) stocks of these chips are discovered, but when you're looking for these chips others may be to. Brokers (not 'Chips Broker, Inc.', but the ones acting for the seller) know these things. It's a real market...

and I'd take another 1,000 (guaranteed) in September, if the price is the same.

This is not an impressive argument. There is no steady flow of these components and no broker will stock them on your behalf unless there is a very big reward...
It's better to buy as much as you can at once and have a bank finance the stock (if possible), but I'm just guessing...
I'm just a simple publisher of chip information on the WWW. ;-)

And I fully sympathise with the many buyers in this market (as does 'Chips Broker, Inc.') but scarce chips are really scarce...
We daily have to disappoint people that search for a small amount of obsolete chips for example, which REALLY breaks our hearts, but these are the harsh realities unfortunately...

Forgive my frankness...

Greetings,
Jaap

Confirmation

And 'Chips Broker, Inc.' confirmed this (privately):

Hi Jaap
Well said.

The parts I quoted him in March are long gone.
The only ones I have been able to locate are 500 pieces of a 1981 date code and my cost is over $2.50 so of course I would have to charge him well over $3 to make it worth shipping.
It is very normal to see parts double and even triple in price when they go obsolete. The $2.65 I quoted in March was actually a very good price.
Sorry that he didn't like it. Now he can't get what he needs at any price. 'Harsh realities' is correct.

Ah well, you win some and you lose some!
Suzanne

(Names were changed...)

Another striking insight

Date:    19970826
From:    Chips Broker, Inc.
To:      Jaap van Ganswijk <ganswijk@xs4all.nl>
Subject: (Fwd) Re: TDA9999X

Hi, Jaap here is an example of someone who just doesn't get it..... I believe I started this correspondence with him in June. At the Time I had over 7,000 available and since we have been going back and forth we have lost stock, etc.etc. He keeps asking for more parts but never buys. Somehow he thinks there is a supermarket in the sky that keeps millions of obsolete parts around just for him!

AAAAGH!!!

Suzanne

Date:    19970826
To:      Chips Buyer, Inc.
Subject: Re: TDA9999X
Dear Suzanne,

With reference to the chips, we are waiting for the official order from our client.
However, whilst accepting that you cannot commit to exact price and quantity for future orders, I do need to know what is the current availability for chips beyond the original 1800.

Can you do some investigation and ascertain how many you may be able to get your hands on in the coming weeks. As you know, our client requires 10,000 with the first order being for 5k. If all you can ever get your hands on is 1800, I need to know so that some contingency in the form of manufacture can be considered.

Best regards, James Chips Buyer

Dear James,

Believe me I do understand your dilemma. But here is the
situation.....

Our database is updated weekly we keep current on about 2,000,000 records, we delete all duplicates , and add all new entries from the 200-300 emails we get per day. If we do not have it on the database we can post it with approximately 2,000 other distributors and suppliers worldwide. This gives us an incredibly accurate picture of parts available.

Our database has 3 listings. Two of which show about 90 pieces total. The other is the supplier who has 1800. (10 days ago he had over 6,000 but he has been selling them). We have posted this and had NO response and no new availabilities via fax, email, etc. Now there may be some OEM out there who is sitting on 200,000 of them but he is not selling them and I don't know who he is. He may decide to sell 10,000 or 100,000 in a week or in a year, after his production requirements die or his product is redesigned. But he is not selling today. If you wanted to give me an order for 5,000 pieces I could not accept it. I only show 1,890 pieces available for sale on the whole planet. And they may be sold to someone else tommorrow!

Believe me I would love to sell you 5,000 or 10,000 pieces but unless a miracle happens, I would never be able to deliver. I sincerely suggest you have an alternate design or at the very least an escape clause in your contract which states you can only deliver product based on availability of this part. I have worked with many major OEM's in the past 20 years and have sadly seen too many hurt because they did not have the escape clause or alternate design. I will post this again and hope for a response, but I honestly don't believe I will find anything different. We will try!

Most Sincerely
Suzanne

(The names were changed...)

Chip brokers outside of the USA:

local	Africa
local	Asia
local	Australia
local	Canada
local	Europe (including the whole of Russia)

Chip brokers inside of the USA by first letter of name:

Click on the first letter of the broker you're looking for:

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Click on the first letter of the broker you're looking for:
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Order:	Chips

Date	19970618
To	chipsbuyer@oem.com
From	Jaap van Ganswijk <ganswijk@xs4all.nl>
Subject	Re: Chips being sought