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EMS industry faces tight inventories for parts

El Segundo, Calif. — Major electronics contract manufacturers are faced with tight inventories of parts and finished products and a glut of raw materials, according to market research firm iSuppli Corp.

Inventory at five of the larger electronic manufacturing service (EMS) providers show that components and raw materials accounted for nearly 70 percent of total inventories during the first quarter of 2010, the latest date for which quarterly data is available, according to iSuppli. In comparison, work-in-process goods made up about 17 percent of inventories, while finished goods comprised less than 15 percent.

Finished goods were at their lowest level since the fourth quarter of 2008 and the imbalance is likely to persist, according to Thomas Dinges, iSuppli EMS and ODM analyst.

“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,” Dinges said, in a statement.

iSuppli’s report “EMS and ODM Inventory for 2010 Looks Like a Sequel,” indicates that the biggest issues for EMS providers are extended lead times for components. Many semiconductor companies are noting extended lead times and part shortages as a major problem, Dinges added.


For example, iSuppli cites that lead times have worsened for a wide range of semiconductor discrete devices, with deliveries running as much as 100 percent 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, while the longest lead times are for rectifiers and small signal discretes, now running at 20 weeks compared to 10 weeks last year at this time, according to iSuppli.

The situation is not likely to improve until later this year even if demand softens in the near term, due to seasonality factors and the slow pace that suppliers are bringing on additional production capacity, said Dinges.

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