PCB | April 18, 2007

Requests for warranties increasing<br>within PCB and Semi

Warranty Week has made an analysis of a hundred semi and PCB manufacturers and has found a noticeable split between the device manufacturers and their suppliers.
The splits in the automotive and computer industries, where those located further up the supply chain have generally lower warranty costs.

Makers of test equipment and production machinery seem to pay the most, although warranty costs are volatile across the industry. The chip and PCB makers are those who pay the least -- some so little that they don't bother to report it to the SEC.

Product warranty costs in the semiconductor and printed circuit board industry tend to flow towards the manufacturers of the machines that are used to make the parts, rather than to the parts themselves.

Of the 80 manufacturers for whom warranty claims rates could be calculated at the end of both 2005 and 2006 (some are still not completely compliant with FASB FIN 45 disclosure rules, and four are late with their recently due financial statements).

In fact it seem to be a lot more volatility in this industry segment, as compared to others such as automotive and appliances.

Warranty Week believes there are three reasons. First, most of these equipment suppliers aren't making millions of units. Actually, some of their machines can cost millions of dollars each. So they don't sell many -- certainly not in the volumes seen for washing machines or family sedans. And, with such a small installed base to service, repair rates will be more unpredictable.

Second, those who do make millions of devices make them more or less the same way every time, or at least they try to. So if there's a problem, it's going to be widespread but at the same time localized

Third, the semiconductor and PC board industry is quite young in comparison to the 96-year-old Whirlpool or the 104-year-old Buick or the 170-year-old John Deere. Perhaps because they've been manufacturing longer, selling longer, and repairing longer, they have a better grip on warranty costs?

Please click here to read the full report.
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