For several quarters now, company after company has claimed the widespread shortages of parts is pushing out deliveries and costing them short money.
Sanmina-SCI, Flextronics, Benchmark, Jabil and others have been very specific about the amount of coin they’ve missed out on in any given quarter, but each time they’ve taken pains to explain that those orders have been delayed, not canceled.
Now here’s Sony Ericsson, taking it one step further by claiming the shortage of printed circuit boards and LED screens actually led to canceled or lost orders. That Sony Ericsson outsources smartphone production to, among others, Flextronics and Foxconn, whose sales continue to rise, adds to the intrigue.
Assuming most electronics orders are zero-sum programs — in other words, if someone loses one, that means someone else won it — my question is, Who won the programs? It must be the company that has all the parts. But if every company is claiming shortages, something’s not adding up.
Does this seem logical?
I constantly review this issue with my distributors/component manufacturers…
I think the issue is much more complex than “zero-sum”.
The shortages are real.. and I suspect for awhile just delays/slows things.
Eventually.. it will change the market (shrink it?)
In the referenced article.. the focus appears to be directed at cellphone production.
While this is a very large market.. it’s component requirements are not representative of the electronic component market in general..
I don’t think it is currently affecting the availability of raw pcb material, 0603 resistors, or displays for industrial/commercial/military products… not likely effecting market for TVs.
The cellphone market (handset? really? why did someone think this was a good naming change?.. “handsets” has been around for over a century) …. is a market with large swings in demand based on technology changes and availability of discretionary capital.
We really don’t have to replace our IPhone 3g with a IPhone 4 or a Android.. (at least this week)
so… if a really trick product is produced with conservative production.. and then comes up short.. I don’t expect the demand to shift to another product…right away.
I expect a delay ( 1-6 months?), then .. maybe a purchase.
Yea… in that amount of time… they risk losing the sale… but it may be just delayed.
(this would fit with your “zero-sum” observation.. but not be seen in market for months)
later in same article….
” The company didn’t do “fire sales” of old products in the quarter, choosing to preserve profits over unit volume, sales chief Kristian Tear said.
It also planned production conservatively so as not to end up with big stocks, Nordberg said in an interview on Bloomberg Television. “We didn’t have more so we couldn’t sell more,” Nordberg said. “We expect to improve the top line.”
This from the same guy stating there was a shortage of PCBs and LED displays…(?)
Which is it ? chicken or the egg?
I think he could have done better job of coordinating the messages from “sales chief” and CEO.
Or maybe .. the subject is just too complex to accurately portray with one answer.
Maybe they should have stated the obvious….
We didn’t plan well enough… or… We didn’t plan well enough with our suppliers.
The suppliers are tired of being jerked around (nearly killed the distributors with the 2001 downturn) and because they are trying to maximize their profits.. they don’t carry the excess inventory they used to…
Supply chain? development support?… it’s all changing….
Changes are happening faster than the players can accommodate.
Expect more of this .. not less.
( I just had to get that “handset” thing off my chest.. please excuse me)
John, I do believe the component shortage problem is real. (Am hearing some lead time quotes are out to 40 weeks now — incredible!)
But I questioned whether Sony Ericsson is truly taking a hit from customers (presumably the retail channel) over said shortages. If they outsource to Foxconn and Flextronics, then wouldn’t those two EMS companies also be facing cancellations? Instead, Flextronics execs have publicly acknowledged delays, but no cancellations. (Foxconn isn’t talking.)
Certain IC foundries I have spoken with tell me that they are booked through year-end and are not allowing customers to appreciably change orders. Whether that increases or decreases the risk for double-bookings, I don’t know. My big concern is we are potentially headed to an over-inventory situation as companies’ procurement practices break down out of desperation, even though I think some tension in the supply chain ultimately is good for everyone’s profitability.
Finally, I agree that cellphones are a poor emulator for the broader electronics market.
Is Sony Ericsson really taking hit?.. maybe.
But you can’t tell from their explanation, who’s fault it is… (or if it is real).
You have good reason to question their explanation….. (it’s conflicted)
My contacts with Foxconn and Cisco.. tell me they are having problems getting parts also.
And all the distributors I talk to… are VERY wary of double bookings creeping into the equation.
I always thought company purchasing agents that did double booking… were short sighted weasels (bad corporate citizens)… but what can you do? They are working with the wrong incentives…Reflecting the marching orders of their short sighted COOs / CEOs..
Distorting metrics that are used throughout the rest of the economy.
Just wrong… (at so many levels)
Everyone in same boat.. I think the players are generally accepting delays rather than cancellations…
If they believe the shortages are real, what would be the point of cancellation? Any other CM (that is being honest) .. will give them the same answer…. you will have to wait.
Over inventory.. .bad
Under inventory.. bad
System out of sync…. and players don’t appear willing to address the reasons why.
Reasons why .. many.
Seems we are forever excessively oscillating..
It appears as if ..
We have a capitalistic supply chain tuned for a certain rate of change..
A rate, that doesn’t match the real world anymore. (un-dampened or over-dampened)
The engineer in me, coming out….
When technology moved slower… when the world moved slower… much easier to “tune”.