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One of Force Technologies’ core values is honesty, and we believe that being transparent with pricing allows us to establish trust with new customers and maintain it with our valued customers.
In the most recent cycle of allocation the semiconductor industry has seen an enormous shift in standard pricing which has impacted many different sectors such as automotive, industrial, aerospace and defence, and given many in the industry countless sleepless nights. In this article I will discuss the main drivers of Force Technologies’ pricing and how we maintain our integrity throughout tough times in the industry such as allocation.
The first important point to focus on is the issue of quantity. When a semiconductor is in production it is produced in extremely high volumes, which inevitably results in a lower unit cost. When it becomes obsolete and mass production is no longer an option on the table unit costs increase and continue to increase as supplies of that semiconductor dwindle in the market. We often hear “my system shows this part only cost $2 when it was made, why the increase?”, and we explain that that part was probably made anywhere between 15 and 30 years ago. The small quantities of solutions designed as often requested, especially by the aerospace and defence industry, will generate higher costs than if we are providing a solution with base material that is freely available in the market and/or still manufactured due to the issue of quantity. Closely linked with the issue of quantity is the basic principle of supply and demand. Each time supply of
a particular part decreases or experiences a lull in the industry but demand remains high,
delivering our high-quality solutions, from purchasing, sales, operations, engineering, logistics and management. When we are designing a solution, effort goes into every aspect from verifying that we can provide continuous sustainable support, securing base materials required, and producing samples for example.
price is driven up considerably. This effect is compounded even further when the part is obsolete due to industry knowledge that the part is not going to be manufactured again. Each pocket of obsolete stock that is snapped up drives
a higher price compared to parts that are still in production, even compared to allocation times like the one we have all just experienced. Over the years at Force
Technologies, we have seen customers clearly need an obsolete part for their system yet wait to act on their obsolescence problem. When the situation becomes critical and we verify a part’s status in the market, price has already increased due to demand remaining high but supply inevitably getting lower and lower.
Another factor to consider in pricing is the time since a part was made obsolete. Force Technologies provides solutions to parts that have become obsolete but that are still required for systems today meaning they are legacy parts. Each year that passes since a part was in production drives the cost of that part up. In many cases, it can be decades since a part was manufactured but the technology of the systems that part has been designed into continues to improve year on year. Further to this point is time spent on a solution or design we provide. Force Technologies has over 36 years of engineering experience and as such we always take our time to provide you with the highest quality solution we can offer. Whilst the engineers are the stars of our show, every department is involved in
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A final important factor to mention is additional requirements. When we are providing a solution, we are always customer led and customer specifications are our top priority. This inevitably means different requirements for every solution and every customer, for example extended testing, specific device characteristics, specific package type, even long-term storage where applicable. Every requirement has associated cost factors with ensuring customer specifications are always met. When providing solutions,
often we are the more expensive solution, but we are honest about our costs and do not promise to be the best solution available where pricing is concerned. Another one of Force Technologies’ values is integrity. We will not work on massive margins and markups, even when we know that we are a customer’s last chance saloon. Similarly, we will not raise our prices when we know the customer has gone round the world many times before coming to us. We will also not quote a price for our solutions just to raise that price when we receive the order. Standing firmly in our values of honesty and integrity, we will never promise to be the cheapest solution out there but what we do promise is that we will go the extra mile to produce a high-quality solution for you.
https://www.forcetechnologies.co.uk/ Components in Electronics July/August 2023 19
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