According to investment bank JPMorgan, the electronics technology supply chain exited 2007 with healthy inventory levels but took a step backward in Q1 as some excess inventory developed.
However, what’s encouraging is that supply chain inventories are heading in the right direction again and are better than historical trends almost across the board. Where was inventory worse you ask? Electronics manufacturing services (EMS) and telecommunication OEMs saw inventories track slightly worse than historical trends after posting the best inventory metrics in Q1.Semiconductor capital equipment OEMs stuck out for poor inventory management led by Applied Materials which is just ramping its long-lead time solar business.
In the spirit of the Olympics below are the best Q2 inventory performances.
Gold medal
Networking OEMs. With only 32 days of inventory, this segment reached a new 10 year trough led principally by Cisco Systems which set an individual 10 year record-low for inventory days at 30. In comparison, at the peak of the last technology recession Cisco’s inventory days hit 90.
Silver medal
Distributors. In this case, both component and computer distributors were able to reverse course from their Q1 builds and show healthy quarter-on-quarter inventory day reductions.
Bronze medal
Retailers. At first glance their 21 day quarter-on-quarter build could be alarming, but history says its almost three days below normal trend, it’s inline with the 69 days from a year ago, and the lowest June level since 2000.
How about EMS?
Inventories for EMS providers is up marginally, but still healthy. EMS inventory days rose less than one-half day to 49 days, worse than the historical 1.4 day decline for a June quarter, but barely up 1% quarter-on-quarter. The 49 days for a June quarter are the lowest since 2005 when EMS inventories troughed for a June quarter at 40 days. Despite EMS inventories being approximately two days worse than historical trend, many in industry still feel they can move back to the 40-45 day range as we head into 2009.
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