PC sales uncertainty result in supply chain reductions

PC distributors and ODMs are keeping inventories low as a result of falling PC shipments as consumers are turning to smartphones and tablets.

Within the poor PC market, amidst a never-ending stream of gloomy predictions from analysts and pundits, computer manufacturers and distributors are working hard to keep their inventories to a minimum, according to the latest briefing by analytics provider IHS.

See also: Building a sub-$300 PC (May 2013 edition)

Of all the players in the huge PC supply chain, PC distributors themselves hold the smallest inventories, carrying as little as 30 days' worth of stockpiles during the fourth quarter, and these mostly consisted of fully built computer systems awaiting sale.

Closely following the PC distributors are the original design manufacturers (ODMs), who were carrying only 32 days of inventory of PCs.

"ODMs and distributors are striving to keep a minimal amount of computers in stock, partly because once-dominant PCs have now been upstaged in the minds of consumers by mobile devices like smartphones and tablets," said Sharon Stiefel, analyst for semiconductor market intelligence at IHS. "Global PC shipments fell last year for the first time in 10 years, while shipments of smartphones and tablets continued to boom. Because of this, companies are attempting to minimize future risk by keeping inventories of unsold products at low levels."

But it's not just to mitigate risk that is causing PC distributors and ODMs to keep inventories low. The PC market is traditionally a market where inventories are kept low because the rapid progress of technology gives PCs a short shelf life.

During the fourth quarter, it was the semiconductor suppliers, which held the greatest amount of stockpiles, estimated by IHS to be in the region of 85 days on average. And the stronger the market share of the semiconductor supplier, the more comfortable they are in holding more days of inventory.

Semiconductor manufacturers can keep higher levels of inventory — in the form of raw materials, works in progress, and finished goods — because these items are much cheaper in absolute terms, compared to the products being made using them further down the supply chain. Having an ample supply of raw materials means that semiconductor manufacturers can be more responsive to the needs of their clients.


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