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Electronics Production | August 30, 2010

EMS suffer from supply chain pile-up

Component shortages have led to a traffic pileup in the global electronics supply chain, with major contract manufacturers facing a challenging supply imbalance characterized by tight inventories of parts and finished products and a glut of raw materials, according to the market research firm iSuppli.
A quick snapshot of inventory at 5 of the larger Electronic Manufacturing Service (EMS) providers showed that components and raw materials accounted for nearly 70% of total inventories during the 1Q/2010. In comparison, work-in-process goods made up about 17% of inventories, while finished goods comprised less than 15%, iSuppli continued.

"iSuppli believes that the current trend—in which electronics inventories are being weighed down by an overwhelmingly large percentage of raw materials—will continue for some time to come, given that more product in kits are waiting to be finished", said Thomas Dinges, iSuppli EMS and ODM analyst.

Biggest near-term issue: extended lead times for components

However, the market researcher believes that extended lead times and parts shortages are a big problem. Lead times have worsened for a wide range of semiconductor discrete devices, with lead times running as much as 100% longer than for the same period last year. The shortest lead times—at 10 weeks as of July—are for connectors, up from 5 weeks in July 2009. The longest lead times are for rectifiers and small signal discretes, now running at 20 weeks—a full five months compared to 10 weeks last year at this time.

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