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Electronics Production | March 23, 2010

Commodity parts supply remains tight

US based analyst firm iSuppli Corp. said supply of commodity parts remains tight amid conservative capacity management.
Given the ongoing vigilance among manufacturers, inventories will remain lean for the foreseeable future, iSuppli said. Despite Days of Inventory (DOI) remaining close to historical lows at nine of the 10 supply chain nodes tracked by iSuppli, many suppliers have no qualms with their current inventory position and remain quite comfortable at their current levels. Among the nodes, only Electronic Manufacturing Service (EMS) providers have shown an increase in inventory, iSuppli noted.

One reason for the lack of interest in expanding production is that fourth-quarter earnings for component suppliers were exceptionally high. With earnings looking good at the moment and suppliers having taken a beating in late 2008 and most of 2009, companies possess no reason to embark on risky expansion alternatives—including ramping up inventory—that might land them in trouble, according to iSuppli, which predicts change will occur near to the third quarter when suppliers aim for increased market share while at the same time maintaining the profits they had acquired in late 2009 and early 2010. The achievement of those goals, however, is contingent on sustained market demand.

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