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Analysts see erratic MCU supply chain

Posted: 11 May 2011 ?? ?Print Version ?Bookmark and Share

Keywords:MCU? supply chain? Renesas supply disruptions?

MCU product vendors already hampered by supply chain issues should brace themselves for more disruptions and shortages in the coming months.

In the first quarter of the year, leading suppliers Atmel, Freescale, Microchip, Renesas and others reported healthy seasonal performances, all of them buoyed by a successful 2010.

But all that changed in March, when the great earthquake hit Japan. Several chipmakers were impacted, including Renesas Electronics Corp., the world's largest MCU supplier. Fujitsu Ltd and other MCU suppliers with fabs in the region were also impacted.

Japan's automotive and CE giants were also affected. In fact, Toyota and others have been hit hard by shortages of MCUs and other components, causing plant shutdowns and extended lead times for some car models.

In MCUs, Renesas has largely recovered from the quake except for its Naka fab in Japan, which represents 20 percent of the company's MCU capacity. To date, the Naka fab has not resumed production.

Renesas' situation, coupled with depleting inventories in the channels, could cause relatively minor shortages of MCUs in the second quarter. "I don't expect ASPs to be up" in the coming months, said Steve Sanghi, Microchip Technology Inc.'s president and CEO, but "the September quarter could be worse" in terms of obtaining MCU supply.

Indeed, Microchip and others are apparently picking up some MCU business from various OEMsat the expense of Renesas and its misfortunes. "Microchip, as suspected, is beginning to see increased business as a result of supply disruptions as management will likely benefit from substitutions and re-designs," said analyst Doug Freedman of Gleacher & Co., in a report.

MCU vendors

Source: Gartner Inc.

"Our view remains that visible Renesas disruptions will likely result in new opportunities and/or deepening relationships as Microchip benefits from becoming a larger supply source for MCUs globally," Freedman said. "We believe the impact will ripple through over the course of the next two to three quarters."

Simply replacing MCU parts from one supplier to another is easier said than done. "I have heard of (MCU) shortages, indeed some from Renesas," said Tom Starnes, an analyst with Objective-Analysis. "Unfortunately, re-qualifying products through different equipment and facilities takes time and effort by both vendor and OEM. Such things are normally scheduled carefully so as to not disrupt product flow."

The MCU market dropped like a rock in 2009. In 2010, the market rebounded and hit $15.1 billion, according to Gartner Inc. The MCU market will likely exceed a value of $16 billion for 2011, up 9 percent over 2010, according to Databeans Inc.

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