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Evidence of Trouble in the Electronics Sector

|Includes: AVT, Texas Instruments Inc. (TXN)

I talked to a good friend of mine last night, and she told me about a problem that is now facing the electronics sector.  As a result of the credit crisis, the major electronic manufacturers are wary of taking orders that might not get paid for.

She uses a website called FindChips.com to do parts acquisitions for an electronics manufacturer.  One of the things she is seeing is that the lead times for some of the electronics parts is WAY out-of-hand.  Some ICs (integrated circuits), when ordered from Texas Instruments, have a lead time of 40 Weeks.

Avnet, a major distributor of electronic components, has a lead time of 144 Weeks on some of its components.  Basically, that tells me that they don't want the business.  You can practically build a factory in that amount of time, so why would I wait that long to pay full price?

Seriously, if I go into a retail or wholesale establishment and they keep telling me, "We can order that for you.", then why can't I order it myself and save money in the process?  That's happened to me at tire shops, dealerships, clothing stores, etc.  NO, if these people don't want to take the risk of carrying merchandise, then they don't deserve my business.  You can apply the same logic to the procurement process with large industries as well. Time is money, especially with electronics.

Basically, this credit crisis is decreasing productivity worldwide, in this sector at least, as economies of scale disappear.







Disclosure: No position