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Poor PC outlook drags supplier stocks at minimum

Posted: 15 May 2013 ?? ?Print Version ?Bookmark and Share

Keywords:PC? supply chain? ODM?

As a result of the persistent decline of the PC market brought about by the non-stop consumer shift to mobile devices, computer manufacturers and distributors are striving to minimise their inventories. PC distributors hold the smallest levels of inventory among all players in the PC supply chain, carrying just 30 days' worth of stockpiles in Q4, primarily consisting of completed computers. Original design manufacturers (ODMs) held the second smallest levels of inventory, carrying just 32 days of inventory (DOI) of computers, noted IHS.

"ODMs and distributors are striving to keep a minimal amount of computers in stock partly because once-dominant PCs have now been upstaged in the minds of consumers by mobile devices like smartphones and tablets," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. "Global PC shipments fell last year for the first time in 10 years, while shipments of smartphones and tablets continued to boom. Because of this, companies are attempting to minimise future risk by keeping inventories of unsold products at low levels."

Aside from rising risk, the business model used by PC ODMs and distributors lends itself to maintaining low inventory levels.

PC 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 come in and then go straight out as quickly as possible, which partly explains why they have the smallest DOI of all participants in the PC technology chain.

Semiconductor suppliers possessed the largest amount of inventory in the PC supply chain in the Q4 where they held the greatest amount of stockpiles at 85 days on average.

Semiconductor manufacturers are able to keep a greater amount of inventoryin the form of raw materials, work-in-progress or finished goodsas 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 towards 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 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 towards demand if needed.

Among semiconductor suppliers, companies with a stronger market share in discrete and analogue technologies are more comfortable in holding a larger-than-average DOI. This is due to predominance in their product portfolio of catalogue devices such as high-volume commodities, which tend to possess a longer shelf life.

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