March 17, 2010

20 week lead times have customers scooping up inventory pockets quickly

Converge Semiconductors and Integrated Circuits Update.

Shortages take hold.
The shortages and extended lead times that we have seen for the past 2 quarters continue and show very little sign of letting up. In fact, some manufacturers seem to be increasing lead times - and we are certainly seeing the activity in the market. Maxim, On-Semi, Cypress, and International Rectifier are now reporting lead times that are out past 20 weeks and prices are rising in the market as well as in franchise distribution. Texas Instruments (TI) lead times continue to exceed 20 weeks, although some of the TPS series (DC converters) appear to be freeing up. Also, TI DSP looks to be getting tighter in the market along with some of the MSP430 series (processors). Freescale processors continue to be short, as well, with little relief in sight.

There have been reports of increasing lead times from Xilinx due to wafer shortages. The increased lead times, and what some industry analysts claim to be low safety stock levels, could be somewhat concerning to customers. Also, Xilinx terminated its 23-year franchise agreement with Nu Horizons in June, leaving Avnet as its only global distributor. It will be interesting to see what effect this will have on Xilinx supply and pricing throughout the transition and until Avnet gets fully up to speed on supporting all customers.

Overall we see shortages continuing through the next quarter. We are hearing more and more about lead times extending and new manufacturers experiencing tight supply rather than lead times improving. In fact, some industry experts expect conditions to get noticeably worse before they start to improve. We have been observing pockets of inventory being bought up quickly. With so many customers out looking to fill shortages, companies need to act rapidly to secure product. With current market conditions, some customers are even buying buffer stock to ensure delivery.

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