Shortage Of Key Commodity Components Still Plagues Supply Chain

Sept. 9, 2010
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Solar cell applications

Power devices

Key commodity electronic components continue to be in short supply, causing prices to rise and delaying deliveries of parts to customers, according to a report from iSuppli. With demand exceeding supply, availability remains extremely tight for widely used analog and memory ICs.

The supply situation is even more critical for standard logic ICs and power-management discretes such as low-voltage MOSFETs and tantalum capacitors, which are now experiencing shortages and are effectively on allocation status, meaning suppliers are unable to respond to unforecasted demand. For standard logic ICs, allocation is continuing for the fourth month and is likely to persist until the end of the third quarter.

In the analog IC space, manufacturers have been increasing average selling prices (ASPs) for the last three months. Not only is the imbalance expected to persist until the end of 2010, but lead times will continue to extend and ASPs will keep rising, iSuppli said.

The situation is just slightly calmer on the memory IC front, where expected future demand and inventory rebuilding efforts are being balanced by currently soft sales as well as falling prices. Nonetheless, troubling signs are pointing to possible severe shortages in NAND flash during the third quarter, especially if suppliers are unable to achieve an optimal mix in production.

LED Backlights In Short Supply
LCD makers suffered from key component shortages related to LED backlights in the first quarter of 2010, according to Display Search.

“Many LCD makers didn’t recognize the limited capacities of key material suppliers before fixing their LED TV panel shipment targets. In particular, PMMA and PET materials are in significant shortage. PMMA and PET suppliers are slowly expanding capacity since they need time to add new plants and face financial limitations,” said Kevin Kwak, DisplaySearch research director.

Optical polymethyl methacrylate (PMMA) shortages have limited production of TV light guide plates. Many reflector film suppliers that use white polyester (polyethylene terephthalate, or PET) were stretched between demand from LCD and solar cell applications (Fig. 1). In addition, many LED makers faced a sapphire substrate shortage. More information can be found in the DisplaySearch Q2’10 Quarterly LED Backlight Report.

DisplaySearch has some suggestions regarding how supply-chain participants can address component shortages. In the case of LEDs, multi-vendor LED qualification and improved LED backlight unit (BLU) design that minimizes the number of chips can help. Furthermore, joint investments between LCD makers and PMMA suppliers can be a solution for securing light guide plate material.

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Lead Times for Components Go Through the Roof
Lead times, which in the supply chain refer to the time elapsed from the moment that a customer places an order up to the juncture that the order is received, have worsened for a wide range of semiconductor discrete devices, running as much as 100% longer than for the same period last year, according to iSuppli.

The shortest lead times for connectors are at 10 weeks as of July, compared to five weeks in July 2009. The longest lead times are for rectifiers and small signal discretes, now running at 20 weeks—approximately five months compared to about two-and-a-half months last year at this time.

Judging from various earnings calls as well as numerous conversations taking place in the industry, semiconductor companies are citing extended lead times and parts shortages as a major problem, said Thomas Dinges, iSuppli electronics manufacturing services (EMS) and original design manufacturer (ODM) analyst.

“Such shortages—in both parts and raw materials—will only add to the strain of EMS and ODM providers, even if they were to train their efforts at simply maintaining current levels of inventory velocity,” said Dinges.

Many supply-chain industry contacts that iSuppli has spoken with do not believe the situation is likely to improve until later in the year, even if demand softens in the near term. The difficulties, Dinges said, arise from a combination of seasonal factors and the slow pace in bringing about increased production capacity. More information about the EMS and ODM markets can be found in Dinges’ new report, “EMS and ODM Inventory for 2010 Looks Like a Sequel.”

“When lead times enter the 20-week range, they indicate a major schism between component supply and demand,” said Rick Pierson, senior analyst for semiconductors and component price tracking at iSuppli, in his report, “Allocation, Constraints and Price Increases Continue for Critical Power Management Components.”

“Supply constraints for electronics and semiconductor components might not come as a big surprise amid the present market rebound,” Pierson continued in his report. “However, specific market and pricing trends are spurring varying degrees of short supply depending on the component market.”

Across the board, lead times are longer than forecasts indicated in June. The lead time in June was 20 weeks for power MOSFETs and small-signal transistors and 18 weeks for bipolar power devices and rectifiers (Fig. 2). In comparison, normal lead times for such products typically run to approximately 10 to 12 weeks.

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