Mike blogged on information from an Asian source back on June 4th:
“Consumer electronics is rebounding in Taiwan, Korea, China and Japan. But, that bit of good news is tempered …by constrained capacity — so many companies cut inventories and took down production lines, they now face material, component and labor shortages.
“The result, is material price spikes.
This is true. The bills are due up-front for the materials and labor, but payment for the finished good doesn’t come until everything’s delivered.
“Several case studies have shown as many companies exit an industry in recovery as do leave during a downturn. They get caught in the cash flow trap, where the upfront costs and associated risk to running the business outweigh the margin.”
Lest I seem like I’m focusing only on the downside of things, I’d much rather point out that this seems like a bit of good news to me. When the bottom fell out last year, the pendulum swung from Go-Go to over-capacity VERY quickly. Electronics manufacturers complaining about the current situation can only happen because work now exceeds capacity… at least for a little while, we should pause and be thankful.
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