Wednesday, April 6, 2011

Many Optimistic Initial Reports Now Being Reversed

A number of chip manufacturers who initially were optimistic or even upbeat about their prospects of firing up production by March 23rd-30th have now either amended projections considerably to mid July+ or completely shut down their facilities as with the early closure of the Freescale plant originally scheduled for a December shutdown to an immediate shutdown

Epson has decided to shutter their crystal oscillator plant indefinitely.  Sony has shuttered 6 plants for the time being with no public projections announced for when this capacity will be fired back up (even partially).  Renesas has acknowledged significant damage to 7 or 9 plants and has yet to provide definitive restart projections

United Chemicon Group has 3 plants that are completely or partially shut down with none of them promising full production schedules for at least two more months  Even these projections are deemed by many to be unlikely and many if not most analysts have resigned themselves to the bleak reality that July resumption of full production to be the new best case scenario.

ANALYSIS:  Even if the July date does occur in some or even all the plants, that means that the production schedule will be behind a full four months on top of existing orders as well as coping with increasing demand combined with the seasonal bump in orders that historically happen in August and September to meet christmas manaufacturing demand.

These developments spell certain challenges for supply chain managers and directors at all levels of CEMs and OEMs.  As the picture starts to clarify that supply is crimped not by days or weeks, but rather months, there will be certain price increases as new foundries are built and existing capacity at competitor sites are stretched beyond capacity to accomodate the increasing world wide demand for electronic components and sub assemblies.

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