Some IC manufacturers view semiconductor distributors as the ugly red-headed step child who slaves away, building up inventory and fulfilling orders. When the electronics industry is hot and fabs are at full capacity distributors can get the short end of the stick as IC companies decide to support high volume and key customers instead of the distributors. In the past, when business was slow, IC companies tried to put inventory in the channel in order to move product. By understanding what’s going on with distributors we can get a general sense of demand at IC manufacturers. So the question is what are some metrics or leading indicators to look for when trying to understand if distribution business will be getting better or worse? There are many numbers that people look at like bookings, billings, book-to-bill, lead times, days of inventory pricing, etc…One metric that continues to trend well is book-to-bill ratio; it’s a ratio of bookings within a time period (usually a month or quarter) and billings within the same period. In a slow economy we generally want to see a book-to-bill >1, which usually means that business is picking up. Over the last few months book-to-bill has been >1; partly due to longer lead times which cause customers to place orders. Looking forward things still remain positive in the short term but there is uncertainty in the air and our PGR network remains cautious about the future.

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This entry was posted on Tuesday, December 1st, 2009 at 3:09 pm and is filed under Bob Nguyen, Semiconductor. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.