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Encoder technologies abound, but software, wiring, and embedded microprocessors let designers tailor magnetic-encoder performance to application requirements.
Once you have a suitable donor mouse with a rotary encoder, you will gut the mouse removing the scroll wheel, rotary encoder, cord, and circuit board.
In devices which use rotary knobs, the AS5601 and its paired magnet may replace a rotary encoder without any change to the host microcontroller or its application software.