Supply Chain Reaction

Oct 1 2007 10:31AM | Permalink | Email this | Comments (2) |
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Consumers still hold the keys to the kingdom in terms of driving semiconductor sales as reflected by today’s Semiconductor Industry Association reported that showed sales increases for August based on demand for consumer electronics and the semi markets that feed them. Indeed, SIA President George Scalise said: “The semiconductor industry will continue to outpace overall economic growth with consumer demand leading the way.” (See: “SIA: NAND supply tightens as holiday build begins.”)

The group made special note of NAND sales -- up by 48 percent compared to August 2006 and up by 19 percent from July of this year -- which led semi sales in August, a month that starts the holiday build for electronics. There’s no real surprise here as other market watchers have predicted NAND unit shipments will increase by 86 percent this year and still others have pointed to the Apple iPhone -- perhaps the “must have” electronics gift this holiday season -- as a huge NAND driver for the second half.

But many of the assertions about NAND are dependent on consumer demand and, with new orders and shipments down in August, according to a Census Bureau report* released on September 26, how this upcoming holiday season will play out cannot be predicted as of yet.

SIA also noted increased sales for PCs and cell phones, both high consumer sellers, but also both high back-to-school season sellers, which the month of August falls into. That needs to be considered when examining the SIA data from an electronics supply chain point of view.

While I was very happy to see the good news from the SIA this morning, I am taking it with a grain of salt. The remaining quarter’s supply and demand flux is extremely dependent on holiday shopping and on October 1, it’s simply too early too tell how strong the season will be. I’m looking forward to two November events that have always been good predictors of final Q4 electronics supply and demand pull: The annual pre-CES consumer electronics estimates from the Consumer Electronics Association (See “CEA: Holidays full of good cheer” for 2006’s forecast); and the morning after Thanksgiving, when I will get up before the sun to hit my local Best Buy and Circuit City for a in-person view of what consumers are buying, not to mention to pick up a few bargains myself (See “Black Friday CE shopping” for more on my 2006 consumer adventure).

What are your thoughts on consumer influence in the electronics supply chain? If you have any predictions on the holiday shopping season and our supply chain, post your comments below.

*The Census Bureau report released on September 26 presents advance information on durable goods manufacturers' shipments and orders. A revised and more detailed estimate plus nondurable goods is expected to be published Thursday.