With inventory in the supply chain at historically low levels there is a real hope that there will soon be an upturn.
But when it comes will the upturn be sustainable?
"A sustainable upturn is not just about low inventories but about increasing demand as well (from an extremely low level)," says one broadline distributor.
And without any real demand from the market any upturn will just be an inventory adjustment.
"Or a pure technical reaction," said the broadliner.
One way of looking at the situation is that demand in the market has dropped so low it cannot really go any lower.
Therefore there is an inevitably in demand picking up at some point, but when.
Demand dropped so fast and hard in the last six months that the supply chain is at component volume levels that are one third below October 2007.
So do we see any signs of the pre-crisis demand coming back?
"Answer for Europe: Yes, but very slowly, "said the distributor.
Another consequence of historically low inventory levels is the inevitable pressure this puts on lead-times.
One UK distributor said there was already evidence of lead-times lengthening on some items simply because there is so little inventory in the supply chain.
"The way I look at it is that lead-times must move out, there is simply no inventory left in the channel," he comments.
Richard,
iSuppli reported a major increase in excess inventory at the end of 2008. http://www.eetimes.com/news/latest/showArticle.jhtml?articleID=212500863
Were chip makers really that successful in turning off their manufacturing capacity so quickly that this excess has now evaporated? Is there another explanation?
If this capacity is now offline, won't their be industry-wide shortages if the economy recovers, even a little?
John