Components Shortages Affecting Vendors Worldwide

At the moment, components shortages seem to be pervasive in the technology industry. Vendors large and small, throughout most of the world, have been affected by them to greater or lesser degrees.

The problem appears to be with us for a while. To be best of my knowledge — and I will concede at the outset that my research hasn’t been definitive — vendors everywhere in the world are having difficulty sourcing adequate numbers of many types of components. The only exception is China, where vendors in telecommunications, cleantech, and other fields have not reported that same component-sourcing difficulties that have hobbled their counterparts in Europe, North America, and other parts of Asia.

That doesn’t necessarily mean that Chinese companies aren’t affected by components shortages. All it means is that they haven’t reported them, at least in the English-speaking media I’ve perused. Still, it’s a development that bears watching. In that China does not ascribe to the tenets of unfettered capitalism, it sometimes operates according to a unique set of rules.

Today’s component shortages span various semiconductor types, including but not limited to DSPs, FETs, diodes, and amplifiers. Vendors of solar inverters, particularly those based in Europe, also have been affected.

Meanwhile, Reuters reports that a shortage of basic electrical components could last into the second half of 2011, limiting the ability of telecommunications-equipment manufacturers to respond to improving market demand.

Reuters reports that memory chips and other fundamental components such as resistors and capacitors are in short supply after their makers slashed output, fired staff, put equipment purchases on hold or went out of business during the recession.
The shortages already have been blamed for weaker-than-expected results last quarter at telecommunications-equipement vendors Alcatel-Lucent and Ericsson, which really don’t need the added grief.

Alcatel-Lucent blamed components shortages for a large loss that it posted in its first fiscal quarter. Alcatel-Lucent’s CEO Ben Verwaayen said the said the shortages involved “everyday” low-cost components. He explained that most components come from China, where the manufacturing industry hasn’t been revamped since major cuts that followed the severe global downturn. 

We already know that the supply-chain issues that afflicted Cisco’s channel partners and customers were blamed partly on component shortages.
What’s more, Dell partly blamed shortages and higher costs of components, including memory, for its inability to maintain gross margins during its just-reported quarter.

And AU Optronics, Taiwan’s second-ranked LCD manufacturer and a supplier to Dell and Sony, reported that an LCD panel shortage is likely to last into the second half of this year.

By no means are those the only vendors affected. You only have read the recent 10-Qs or conference-call transcripts of companies involved in computer networking, telecommunications gear, personal computers, smartphones, displays, or cleantech hardware to understand that components shortages are nearly everywhere.

I just wonder — and I make no accusation in doing so — whether Chinese manufacturers are as affected by the shortages as are their competitors in other parts of the world.
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2 responses to “Components Shortages Affecting Vendors Worldwide

  1. The component shortage is a canard. Its the semi company way of “keeping prices up” and “order book up” and “stock prices up” so they can sell their management stock.

  2. “Component shortage” is a euphemism for “bad forecasting”.

    In the current world of just-in-time manufacturing nobody keeps very much stock around, including the component manufacturers. A reasonably complex electronic device has thousands of parts on its BOM and a lot of them have 12 week lead times, or even more.

    A lot of device manufacturers are conservative about their forecasting because they don’t want to hold component inventory, and they all freaked out and cut their forecasts during the recession. Cancelling lots of orders and lowering forecasts sent a powerful signal to component manufacturers, who laid off staff, shut down lines, and even closed plants. Now these same device manufacturers have increased forecasts, placed new orders, and are bitching about shortages. The component manufacturers are understandably reluctant to invest in new capacity when their fickle customers whipsaw their forecasts back and forth.

    Unused manufacturing capacity is unprofitable, so no one builds it, and there is very little slack in the system. Everyone wants to push their inventory cost to the next guy in the supply chain, and the result is very little inventory being held anywhere, so when you underestimate demand you are left with no product to sell and shortages that last many months. Holding your own component inventory is the best way to insulate yourself against this.

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