June 17, 2009

Slashing of distribution inventories leads to real shortages

Converge Semiconductors and Integrated Circuits Update.

In tracking the market, Converge does not expect any significant changes in demand over the next several months, continuing the holding pattern that the IC market has seen in recent months. Manufacturing fabrication capacity is at the lowest it has been in a considerable amount of time, and distribution inventories have been slashed to minimal levels. However, for the second month in a row we have seen a month-over-month increase in real shortages due to these low inventory levels.

Some customers are still trying to reduce inventory levels, although the number of those doing so has decreased somewhat over the last several months. Nevertheless, there is still available inventory in the market for savvy bargain hunters.

Additionally, Converge is tracking a minor reduction in demand in some military sectors, indicating a slowing of new manufacturing over the next 6-12 months. Demand for military connectivity devices, however, appears to be unchanged, as the repair business remains steady.

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