Semiconductor suppliers possessed the largest amount of inventory in the PC supply chain over the last six years on average while PC distributors had the least, an equation determined not just by the business model ruling each node but also by PCs having lost clout among consumers to more popular smartphones and tablets, according to a new IHS iSuppli Supply Chain Inventory brief from information and analytics provider IHS.
From 2007 to 2013, semiconductor suppliers held the greatest amount of stockpiles at 78 days on average as quantified by the Days of Inventory (DOI) metric, while PC distributors carried the least with 31 days. The DOI measure in this case applied to the goods and subcomponents manufactured by the category in question: for semiconductor suppliers, this meant chips and integrated circuits; for PC distributors, computers were the items being assessed.
After semiconductor distributors, the next-highest DOI was at 45 days, claimed by pure-play foundry suppliers for wafers, chips and chemicals. Also in the range of 40 or so DOI were semiconductor suppliers as well as electronic manufacturing services (EMS) providers, while original design manufacturers (ODM) at 34 DOI placed just above PC distributors during the fourth quarter last year.
All told, the DOI for chip distributors was up by more than a third compared to the second-highest node in the chain.
Semiconductor manufacturers are able to keep a greater amount of inventory-in the form of raw materials, work-in-progress or finished goods-as these items are much lower in cost on absolute terms than other products being made further down the supply chain.
In general, semi manufacturers need to have on hand a certain amount of raw materials to be more nimble and adjust quickly to demand for end customers. Even work-in-progress and finished goods can be redirected toward other customers should demand change during the manufacturing cycle, as parts can be re-marked for a different requirement that fits within device specifications.
In contrast, PC original equipment manufacturers and distributors are likely to only have stock that can move quickly to the consumer. Shelf life is short for computers given that PC models change frequently, so it becomes undesirable to keep finished goods for any length of time. And for PC distributors in particular, inventory needs to basically come in and then go straight out as quickly as possible, which explains why they have the smallest DOI of all participants in the PC technology chain.
Aside from the business model dictated by the supply chain, PC OEMs and distributors alike strive to keep a relatively minimal amount of computers at any one time because once-dominant PCs have now been upstaged in the minds of consumers by mobile devices like smartphones and tablets. Global PC shipments fell last year for the first time in 10 years, while shipments of smartphones and tablets continued to boom and grow in spectacular fashion.
Meanwhile, contract manufacturing entities such as EMS providers and ODMs apply the same rules for inventory like PC makers and distributors: Only a minimal amount of stockpiles is kept specific to orders on the books, with little to no flexibility allowed. What comes in must be assembled and then depart, with little staging of inventory along the way.
In contrast to the PC and contract manufacturing nodes, foundry suppliers can be more flexible with their store of stockpiles, an advantage that allows them to hold a larger amount of inventory and redirect toward demand if needed.
Among semiconductor suppliers, companies with a stronger market share in discrete and analog technologies are more comfortable in holding a larger-than-average DOI. This is due to a predominance in their product portfolio of catalog devices such as high-volume commodities, which tend to possess a longer shelf life.
Read more >> PC Supply Chain Expected to Reflect Typical Seasonality in Q1
