As lead times recall the Y2K fiasco, EMS firms and OEMs must share the risks

The ongoing IC lead-time crisis is pushing the margins of EMS companies and leaving their OEM customers scrambling. As of this writing, production scheduling under the conditions of withering lead times calls for unprecedented measures riddled with hunches and diminishing hope for acceptable recoveries. For now, production planning is all over the map, with EMS companies working closely with their customers to get through this period without major damage to OEMs’ brands and customer loyalty.

Today, lead times for ICs are snowballing up to 25 weeks on average, with some of the harder-to-source components such as tantalum capacitors hitting the 40-week mark (FIGURE 1). TSMC, one of the largest IC manufacturers in the industry, forecasts the global shortages of semiconductors could linger into next year.1 The ringing note stamped on all lead-time quotes is “subject to change,” and in many cases lead times are downgraded to “TBD,” leaving manufacturers spinning for short-term solutions.

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