Pass the (Semiconductor) Chips Please

With the 2022 MPO Summit having occurred only a week ago, my mind has been squarely fixated on medtech supply chain challenges. Our event had a number of sessions dedicated to different aspects of the topic, from labor to nearshoring to material shortages. [Information will be forthcoming on the availability of the sessions in a video-on-demand format, so stay tuned.] So this week, while attending AdvaMed’s The MedTech Conference, it was no surprise I was drawn to a few sessions around the same topic.

The CEOs Unplugged panels are always quality presentations, so when I saw one titled, “Meeting the Multiple Challenges of Ensuring a Resilient Health Care Supply Chain,” I made sure to attend. Little did I know the more apropos title would have been, “The Chip Shortage and Things We’re Doing to Make Due.”

Title “glitch” aside, the session was a great look at a problem MPO has admittedly not afforded much coverage. The primary reason is we always seek to feature content that provides key insight and/or offers real-world solutions. Unfortunately, I have come up dry in terms of contributors offering either concerning the chip shortage. But after hearing a panelist earlier this year say if he had a magic wand, the one issue he’d use it on was the chip shortage, I knew it wouldn’t be long before I was discussing it.

The panel at The MedTech Conference, moderated by Monish Rajpal of L.E.K. Consulting, consisted of Dan Carestio (Steris), Maureen Mulvihill (Actuated Medical), and Jonathan Rennert (Zoll). Virtually from the onset of the session, the CEOs moved to the topic of the chip shortage. Rennert referred to it as the biggest issue in supply chain for Zoll. Carestio noted the problems with panels (displays) for his company and the challenge of being unable to simply switch parts. Mulvihill brought up the purchasing power of medtech firms (rather, the lack thereof; she later suggested medtech was approximately 3% of the customer base for semiconductor organizations). She also shared she was recently horrified when a supplier component suddenly appeared as “indefinite” regarding anticipated wait time.

Carestio later suggested there was hoarding likely taking place by companies across industries; if all their chips were put on the table (figuratively and literally), he surmised there would be enough for all. Whether that’s true or not—of course, no one knows—but it could certainly be the case.

Rennert explained the semiconductor supply chain is quite long from raw material to finished chip. As such, he suspected it took about a year before all of the chips were “sucked out” of supply.

Moderator Rajpal asked if the medtech supply chain was always vulnerable, to which Carestio replied with mention of the low purchase quantity common in this industry. He also echoed his earlier statement regarding the inability to drop-in replacement parts, although he did give the FDA credit for being cooperative and helpful with respect to that.

With all of these problems brought to the forefront, Rajpal asked what was working, looking for some positives. Mulvihill described how her company was determining ways to repurpose older boards and chips to use for newer products. She commented that “just in time” is no longer feasible and companies need to consider bringing in more inventory. Carestio added it was important to design for disruption. In other words, he explained firms need to develop alternative methods for their processes to enable the parts swap-out he mentioned previously.

Rennert brought up an interesting strategy that was not unique to this panel; rather, I heard it also as a strategy for attracting talent. While Rennert jokingly referred to it as begging, his point was to demonstrate the purpose of medtech. His firm has brought in execs from major chip manufacturers (Analog Devices, TI, Micron, etc.) and shown them the importance of the technology they are creating. He admitted it wasn’t the answer, but it helped. He stated medtech needs to continue to share its purpose with suppliers.

Other positive suggestions included OEMs ordering chips for their contract manufacturers, accepting that financial burden in place of their supplier. Another was to “de-chip” designs; Carestio reported 30% to 50% reductions of chips were needed in some cases when designs were reevaluated.

They were all happy to hear of the passage of the Chips Act, but knew its impact wouldn’t be felt for several years. They admitted things had improved somewhat in the last 60 days or so—there is a light at the end of the tunnel.

Hopefully, there’s a nugget among these thoughts and comments that will get you thinking about how you might tackle this problem. Otherwise, I hope you see that same light soon. 

Sean Fenske, Editor-in-Chief
[email protected]