Wednesday, April 13, 2011

Warning about warnings!

Given Japan's March 11th earthquake and tsunami's likely impact on the semiconductor and consumer electronics supply chain, I'm truly puzzled by how few revenue warnings have been released.  We just haven't heard much from the cell phone, PC and tablet companies........and their suppliers.

For component suppliers, this is NOT just a supply side issue.

Here is one of the Rumsfeldian "know unknowns" that haunts the consumer electronics supply chain.  Your semiconductor company may have escaped a disaster unharmed, but if there is supply disruption of ANY component (capacitors, resistors, inductors, specialty adhesives, packaging resins, flex connectors, LCD displays, etc.) for your customer's product (PC, cell phone, TV, etc.), production stops and your sales are slammed too!

In good times, semiconductor suppliers have horrible visibility into their sales channel. They typically ship into a logistics and distribution channel which provides supply to an ODM (Foxconn Compal, etc.), who in-turn supplies the name brand electronics company (Dell, HP, Nokia, etc.), who in-turn supplies retailers who sell to real consumers. When something goes horribly wrong, it can take weeks for inventories to back-up into the semiconductor supply lines and get then you get hit with order de-bookings.

It's not obvious if these risks are being priced into the market's recent retrenchment. As we move into the semiconductor industry quarterly earnings calls and have been warned!

1 comment:

  1. IMO they possibly had inventory builds thet they will have to work off first. Shit will hit the fan though - big time IMO. Nice post.