This guest article written by Component Sense was originally published by Procurement Pro in May 2024.
The electronics grey market often faces criticism due to fly-by-night sellers and the presence of counterfeit components. While some untrustworthy vendors do exist, this should not put procurement professionals off. The secondary market could be the key to reducing the electronics sector's environmental footprint.
Rapid innovation is often fueled by high raw material consumption, meaning the electronics market is a significant contributor to environmental degradation. In 2022, the world generated 62 million metric tonnes of electronic waste (e-waste). By 2030, the annual amount of e-waste generated is predicted to reach 82 million tonnes [1].
There is an increasing regulatory and customer demand to address e-waste at its core. If enacted, the Corporate Sustainability Due Diligence Directive (CSDDD) will mandate EU companies address negative human rights and environmental impacts across their entire supply chain. This directive for corporate due diligence is just a sign of what is to come.
Although better than landfill dumping, e-waste recycling practices like smelting still harm the environment and local communities. Reducing e-waste through smarter forecasting and utilising the grey market is key to circularity. The electronics industry should consider the grey market an integral part of its sustainability solution.
The grey market is not black and white
The grey market comprises a large portion of the total electronics component sector. Unfortunately, component sellers that provide full traceability and anti-counterfeit measures — like Component Sense — are painted with the same brush as sellers of dubious stock.
In reality, the grey market is entirely legal and safe, provided that buyers vet their suppliers. In many instances, honest grey market sellers simply redistribute another company's perfectly good excess stock that would otherwise be dumped.
When choosing a supplier on the grey market, ensure the following for peace of mind:
- The components sold are fully traceable back to the original manufacturer
- The parts have been sourced ethically
- The grey market supplier conducts a rigorous quality assurance inspection process on what they sell
Electronic manufacturers can safely tap into an abundance of brand-new, never-used components by ensuring their suppliers adhere to the above characteristics.
“Rather than buying directly from a franchise, electronic manufacturers can often find genuine, fully traceable stock with new date codes from the grey market, all while saving money,” explains Component Sense Chief Technology Officer, Grant Rutherford.
The path to circularity
By incentivising companies to reuse, repair, and redistribute, a circular electronics industry thrives. Ultimately, a circular economy is a system where raw materials do not become waste, and our environment is protected and regenerated. E-waste plastics may take 1 million years to decompose and aluminium, 50 to 500 years [2]. Not to mention, chipmakers face a scarcity of rare earth elements (REEs).
Buying components safely on the grey market extends the lifecycle of devices AND keeps many sought-after REEs in circulation within the electronics supply chain. It is a win-win. In addition to reducing e-waste, buying redistributed components reduces the amount of new raw materials being extracted from the earth.
The positive influence of the electronics grey market extends beyond the electronics sector. The grey market is often the only place to find obsolete or legacy components that are no longer available directly. Access to a single older component can be crucial to keep a piece of industrial or military machinery operating instead of being redesigned or scrapped.
Quality assurance under the microscope
Dealing with reputable suppliers quashes any grey market quality concerns. These sellers implement a robust quality assurance process to guarantee what they sell. A trained warehouse inspector can easily catch common counterfeiter tactics, including:
- Top coating
- Suspicious packaging and carriers
- Remarking
- Anomalies with pin one marker size and placement
- Signs of previous soldering
Full traceability also guarantees you are purchasing authentic parts. You can only trust redistributed components that come from companies with high levels of safety already built into their supply chains. Many original equipment manufacturers (OEM) and electronics manufacturing services (EMS) also exclusively use components manufactured in the last two years.
“I would like original manufacturers to get involved in the grey market from the point of view of ensuring quality. Supporting the grey market would ultimately reduce e-waste,” says Component Sense Chief Technology Officer, Grant Rutherford.
Looking ahead
The electronic industry stands at a crossroads regarding sustainability, with its relationship with the environment under intense scrutiny. While society’s reliance on electronics is only set to increase, so too is the urgency to address climate change and reduce e-waste.
Now more than ever, electronic manufacturers must prioritise sustainability and tackle e-waste at its core. The electronics sector has a significant role to play in championing vital initiatives like the Paris Agreement and UN Sustainable Development Goals to combat the effects of climate change.
Facing public pressure for more sustainable practices, the grey market offers a way to reduce e-waste. Common hesitations about buying parts from the grey market can be alleviated by choosing suppliers with a proven track record.
In many cases, all procurers need do is send a company like Component Sense their bill of materials. Then, we can compare pricing to thousands of other electronic manufacturers and franchised distributors across the world. All the while, these same companies demonstrate their commitment to sustainability.
References
[2] https://eridirect.com/blog/2015/11/how-long-does-it-take-electronic-waste-to-decompose/
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