Montag, 1. Juni 2009

Component Shortages in the IT Industry?

According to this article, Asia's electronics industry is now suddenly suffering from shortages of key components:

"A shortage of electronic components such as chips and displays threatens to derail a nascent recovery in Asia's technology sector spurred by China's stimulus plan.

But many tech companies, especially makers of memory chips and displays, have sharply trimmed output since late last year or were too cash-strapped to invest in new production equipment in the sector's downturn, leading to shortages of key components.

'Tight supplies are creating a headache for many computer vendors,' said Alex Huang, vice-president of Taiwan's Mega International Securities. 'So it remains a question mark if you ask me how strong the recovery will be in the next few months.'

AU Optronics Corp, the world's No 3 maker of LCD panels for PCs and flat-screen TVs, said that it has a shortage now and can only meet 70 per cent of its orders even if it runs at full capacity in the next three months.

It is a double blow as many leading PC companies have seen their profit margins weaken as they sell more cheaper netbooks."

To me, this makes no sense:

If there really is a shortage of key components, this implies a constraint on the number of orders that can be fulfilled. If demand is higher than possible supply, then prices will obviously increase sharply, both for components and final products. If this is not happening (and the "double blow" argument seems to suggest that it isn't), this can only mean that demand isn't exactly red hot either.

So my interpretation is: The price war in certain component sectors was crazy over the last 6 months. Now, things are getting a bit better for suppliers (among other reasons because some competitors have exited the market, most notably Qimonda), so prices are recovering, but are still way below pre-crisis levels. Meanwhile, end-product demand is also picking up a bit, but not enough to allow producers to increase prices. Sufficient components would quickly become available again if prices rose high enough, but demand still isn't big enough to justify a real price recovery.

So what they really mean is: "At the (low) price we are willing to pay, there are not enough components". That's a bit like saying: "There's a shortage of oil" because you only want to pay 20 US$ per barrel, but suppliers insist on 50 US$...


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  2. Heise Online (a German IT news service) today also reports price increases for LCD panels:

  3. Thanks for the link. Doesn't sound like prices are exploding based on the numbers in that article. If there was a real "shortage", I would expect price jumps of a far bigger magnitude.

  4. Component shortage in coexistence with lower retail prices sound like overproduction. But computer firms are not well known for creating large inventories. I'm puzzled to.