Supply chain hit by ‘hoard’ mentality

”Recent checks confirm multiple chipmakers seeing rush orders as customers seek to ensure stable supply,” said Steven Pelayo, an analyst with The Hongkong and Shanghai Banking Corp. Ltd. (HSBC), in a report.

”Checks with multiple semiconductor fabless, distributors, IDMs, and package/test suppliers all suggest order activity has been robust since the earthquake in Japan,” he said. ”Clearly, chipmakers are attempting to hoard inventory given increased risk of supply side dislocations up and down the entire food chain, impacting end product availability.”

That could be bad news. ”We originally expected the recovery to take longer as other factors (e.g. power stability, logistics, human capital) are difficult to forecast amidst a wide range of potential constraints (wafers, BT resin, capacitors/discretes, optical films, etc.),” he said.

”Previously, we viewed a slower recovery as potential good news, as purged inventory leads to another round of restocking in 2H ’11,” he said. ”However, while strong order activity may be good for near-term demand, we now have to worry that days-of-inventory may build on the already five quarters of increases since the late 2H ’09 trough. If the earthquake impact proves more limited, there is a risk that the likely double-bookings happening today are cancelled and excess supplies turn out to be a problem in 2H ’11.”