As the boom of remote learning and work-from-home wanes and inflation has stopped consumers from spending, the rising inventory has become an issue for the Asia electronics industries.
Due to the US-China trade war, Russia-Ukraine war, pandemic, and accompanying lockdowns, especially in China, Asia-based suppliers have built up their inventories in case of supply chain disruptions, with resilience outweighing cost-efficiency considerations as to inventory management.
According to Bloomberg data, among the nearly 4,000 electrical and electronics-related companies in Taiwan, Japan, South Korea, and China (including Hong Kong), the median inventory days of EMS companies increased from 53.43 days in 2018, when the US-China trade war began, to 70.40 in 2021. The median inventory days for the communication equipment industry also rose from 91.47 to 110.89 days during the same period.
Even though there has been a shortage of chips in recent years, the median inventory days of the semiconductor industry changed from 78.66 to 83.76 days between 2018 and 2021. In other words, the increasing inventory during the past years is a comprehensive phenomenon resulting from companies worrying about supply chain disruption, reflecting a mindset of ‘just-in-case’ instead of ‘just-in-time.’
Still, the declining demand, whether from waning remote working and learning, or global inflation never been seen in the last couple of years, is making the rising inventory more threatening. According to the S&P Global manufacturing purchasing manager’s index, except for China which gradually returned to normal from lockdowns, factory activities in major Asia industrial economies, such as Japan, Taiwan, and South Korea, slowed down in June.
Despite declining demand and rising inventory across the Asia supply chain, it is unlikely for the inventory to back to the pre-2018 level with suppliers keeping resilience in mind. However, downstream suppliers closer to the end markets are more likely than upstream suppliers to be the first to bear the brunt of the global economic downturn.
|
Median inventory days for Asia-based suppliers (days) |
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|
2018 |
2019 |
2020 |
2021 |
Percent change between 2018 and 2021 (%) |
|
|
Electronic Manufacturing Services |
53.43 |
52.47 |
63.85 |
70.40 |
31.75 |
|
Communication Equipment |
91.47 |
96.13 |
102.71 |
110.89 |
21.23 |
|
Semiconductor Equipment |
90.04 |
111.64 |
104.71 |
101.90 |
13.17 |
|
Electronic Equipment & Instruments |
116.33 |
120.41 |
121.14 |
131.38 |
12.94 |
|
Electronic Components |
63.76 |
66.31 |
68.25 |
71.30 |
11.82 |
|
Technology Hardware, Storage & Peripherals |
77.68 |
83.46 |
78.38 |
86.16 |
10.92 |
|
Consumer Electronics |
73.97 |
69.92 |
78.18 |
81.39 |
10.03 |
|
Household Appliances |
67.49 |
70.96 |
70.90 |
72.40 |
7.28 |
|
Semiconductors |
78.66 |
82.97 |
79.62 |
83.76 |
6.48 |
|
Electrical Components & Equipment |
84.85 |
85.72 |
85.77 |
86.50 |
1.94 |
|
Industrial Machinery |
84.85 |
85.72 |
85.77 |
86.50 |
1.25 |
|
Note: Only companies in China, Japan, South Korea, and Taiwan are included in the data. |
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Source: Bloomberg; Compiled: DIGITIMES, July 2022
