A quick inventory snapshot at five larger Electronic Manufacturing Service (EMS) providers show that components and raw materials accounted for nearly 70% of total inventories during the 1Q of 2010, latest date for which quarterly data is available.  Work-in-process goods made up about 17% of inventories, finished goods comprised less than 15%, industry analysis from iSuppli shows.

All told, finished goods were at their lowest level since the 4Q, 2008 and the imbalance likely to persist, according to Thomas Dinges, iSuppli EMS and ODM analyst.

“iSuppli believes that the current trend -in which electronics inventories are 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,” he said.
 
Extended component lead times
Judging from various earnings calls as well as conversations taking place in the industry, semiconductor companies are citing extended lead times and parts shortages as a major problem, Dinges said.

A quick look at many component samples reveals that lead times worsened for a wide range of semiconductor discrete devices, with lead times running as much as 100% longer than for same period last year.

Shortest lead times - at 10 weeks as of July - are for connectors, up from 5 weeks in July 2009: longest, for rectifiers and small signal discretes, now run at 20 weeks - a full five months compared to 10 weeks last year at this time.

Dinges said many supply chain industry contacts to whom iSuppli has spoken do not believe the situation is likely to improve until later in the year—even if demand softens in the near term. Difficulties, he notes, arise from a combination of seasonality factors and the slow pace in bringing about increased production capacity.

“Given that many suppliers were shuttered during the last years because of financial distress, the shortages have resulted in supply bottlenecks in industries,” Dinges said. “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.”