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Power Over Ethernet Interoperability Guide by Sanjaya Maniktala

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Proper Chip Decoupling
We will keep this simple: every modern chip has a lot of things going on “under the hood.” Gates and circuit blocks may suddenly turn on or off in nanoseconds, either demanding a sudden surge of current, or turning that demand off. If local decoupling is not provided right next to the supply pins of the IC, there will be sudden dips and overshoots of the supply voltage on its pins, because the supply rails comes from a regulator usually quite far away, with intervening trace inductances, and the regulator therefore cannot cater to the sudden demands of the chip right away. These supply variations (spikes) can damage the IC (overshoot) or send it into power-on reset (undervoltage). So a low ESR, low-ESL ceramic capacitor, ...

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