TI production problems spark controversy

Bolaji Ojo EE Times (03/17/2010 8:34 PM EST)

Editor's note: First in a two-part series on the analog market

Depending on whom you asked and what supplier they represent, the analog semiconductor market is in a state of uneasy balance somewhere between slightly lopsided and complete disarray. All this is courtesy of a weak economy and miscalculations by some companies over the last year.

While vendors' inventory position and supply-demand status may vary, industry executives almost universally agree the analog IC market is steeped in unsavory controversy that allegedly started at one major vendor and now has the entire analog market segment in a tizzy.

The controversy focuses on whether or not extended delivery times ("lead times" in industry lingo)—reportedly now stretching into months at companies like Texas Instruments Inc.—have become the norm for the entire analog industry or are specific to suppliers who made poor choices during the height of the economic downturn.

Several companies, industry sources said, based manufacturing decisions on assumptions that turned out to be operationally flawed or on misleading forecasts and the shortsighted desire to keep costs down during the recession.

Used for production planning in 2008 and during the first half of 2009, the inaccurate forecasts, many of which called for a continuing drop in demand, negatively affected sales at most companies, disrupted production processes and are generating effects still playing out across the industry.

The worst effects of the supply and demand imbalance, triggered by the inability of the industry to accurately predict future sales, were more obvious at companies like Texas Instruments and less pronounced elsewhere. This was especially true in the second half of 2009, but the entire market segment is still reeling from the impact.

Whether they want to acknowledge it or not, executives at the Dallas-based analog and DSP vendor are at the center of a storm about supply-demand equilibrium in the semiconductor market. In recent months, reports have spread rapidly throughout the industry about spot shortages for TI analog products and lead times that many say now stretch out for months.

Late last year, TI admitted to back-end production hiccups that it is working hard to fix. But other analog vendors have been caught up in the controversy, including Analog Devices Inc. and Linear Technology Inc. Each says it is being forced to assure nervous customers their products are readily available and are within normal lead times.

The impact of all this is still reverberating across the electronic supply chain: TI analog products are in tight supply and lead times are extending from weeks to months. "So isn't it possible the entire industry must be affected,?" is a typical question, said Emre Onder, vice president of marketing at Analog Devices, who joined the company in November.

Five months later, Onder is still being asked the same question even though lead times remain within the "normal" range, he said.

Analog Devices recruited Onder from EMC Corp. as part of a restructuring plan that placed increased emphasis on customer engagement. Onder's OEM experience was critical as the company embarked on a renewed marketing effort. He was quickly drawn into the supply chain controversy and has played a critical role in assuring customers that Analog Devices has overcome problems that could delay order deliveries.

Vincent Roche, vice president of Analog Devices' strategic market segment, has similarly waded into the controversy, teaming up with other executives to assure customers the company can deliver products on schedule despite resurgent demand.

"We have very normal lead times at this point in the cycle on both the silicon manufacturing side as well as the assembly and test part," Roche told EE Times in December.

Roche repeated that assessment last week (March 11) during the company's annual Analysts' Day event in Boston. Lead times remain in the normal range and have not been distorted by rising demand, Roche said.

Executives at Linear Technology offer the same reassurance. Robert Swanson, chairman and founder of Linear Technology, said in an interview that the company took measures during the downturn that safeguarded its supply chain and placed it in a position to satisfy customer demand whenever the industry bounced back.

"We put in place cost control measures, but we were careful to make sure we didn't shut down operations entirely," Swanson said. "Some companies were not as careful."

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