Market Watch

Together, the massive earthquake-tsunami in Japan during March and the most severe flooding in decades to sweep Thailand later the same year spawned fears throughout the semiconductor supply chain of possible severe shortages. Global reaction to the crisis was predictable, with significant amounts of panic buying occurring in semiconductor components, creating painful shortages and worrisome pricing issues in the process.

It’s a known fact in the semiconductor business that any type of  global macroeconomic shift or natural disaster occurring in critical geographic locations in the world can immediately derail the whole supply chain, imparting long-lasting effects that take anywhere from several months to a year or more to resolve. A mere 5 to 10 percent disruption in supply can create discontinuities for all customers and trigger unwelcome allocation procedures.

In the Japan case, the disruption in the making of  critical materials like polysilicon, photo resists and resins had widespread, immediate impact on the price and delivery of a number of multi-sourced semiconductor components. These included NAND and DRAM chips, standard logic integrated circuits, filters, inductors, high-value/high-end aluminum and ceramic capacitors, and metal-oxide-semiconductor field-effect transistors (MOSFET).

As for Thailand, the flooding of 14,000 factories was felt straight away by automotive production, analog and discrete semiconductor manufacturers, hard disk drive manufacturing and electronics assembly—with indirect spillage into the PC, DRAM and set-top box segments.

While the world watched with concern and reacted swiftly by deploying immediate humanitarian aid and support for the countries impacted by the disasters, attention also was quickly drawn to macroeconomic and supply chain issues. Those whose very livelihoods depended on the global supply chain and whose job was to ensure supply continuity for their respective organizations were quickly brought under scrutiny by their customers as well as internal management.

What should one do when confronted by just such a situation, where access to critical information could spell the difference between successfully avoiding a supply chain crisis or being unavoidably trapped into one?

First, do your homework. For instance, analyze the existing state of your supply chain as well as the current pricing (spot, market, contractual) and lead times for your products. A longer, projected four quarter forecast for both pricing and lead times on critical designed-in components could be even more helpful in gaining a deeper understanding of the potential risks ahead.

Next, use IHS iSuppli’s Component Price Tracker (CPT) and intelligence, derived from working directly with a broad array of knowledgeable semiconductor analysts. Such a move lets you develop your best forecast—even as you are able to continually validate, update and make refinements in the presence of new information provided by CPT. Thus, forecasts can be improved by accurate information, further reducing uncertainty in the process. While it is true that natural disasters are difficult to predict, their impact on your business and their associated costs can be effectively minimized by tools like CPT at your disposal, circumventing severe disruption or even devastation to your supply chain.

What CPT can do for you
The IHS iSuppli Component Price Tracker (CPT) tool was launched to develop and standardize methods for uniform application to a range of strategic, commodity-type components. In a significant upgrade, CPT became available starting January 1 via TRAX™, an innovative analytical tool that lets clients create custom views and drill down into the data in a fraction of the time it takes to manipulate static Excel files.